2026-VIL-1561-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Determination of service category – Taxability of Business Expenses – Appellant advertising agency was registered for service tax under forward charge - Department raised demand alleging non-payment of service tax under reverse charge on business promotion expenses, conveyance expenses, legal expenses and freight expenses during the relevant periods - Appellant contended that department merely relied on figures in balance sheet without identifying or classifying the service category for which reverse charge was applicable and that without such classification no charge can be levied under RCM - Whether service tax demand can be confirmed on reverse charge basis when the department has merely compared figures from balance sheet with Form 26AS without establishing specific taxable service categories - HELD - The department must establish the specific service category for which reverse charge is applicable by classifying the nature of service received before raising demand - The Commissioner (Appeals) did examine each category of expense and determined specific service tax amounts for each category establishing the nature and taxability of respective services and hence the plea that services were not classified is factually incorrect. However, the appellant being a service tax payer required to pay service tax under reverse charge would have had the benefit of credit against its output liability rendering the transaction revenue neutral and indicating absence of intent to evade - Where tax paid under reverse charge would be available as credit rendering it revenue neutral, extended period of limitation cannot be invoked as the ingredients of willful statement or suppression with intent to evade are not satisfied. Demand is upheld for normal period of limitation only with penalty under Section 78 being set aside and matter remanded for calculation of demand and interest – The appeal is partly allowed
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