2026-VIL-1700-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Grants-in-aid received from Central and State Governments - Whether consideration for taxable service - Appellant, a body representing trade and commerce, received grants-in-aid from Governments, and the department demanded service tax under Business Exhibition Service on the grants, contending that the Appellant is not a charitable organisation - Whether service tax is leviable on grants-in-aid received from Governments - HELD - Only consideration can be made liable to service tax, and for a taxable service there must be a service provider, a service receiver and consideration. The grant was conditional, the agreements required utilisation certificates and made the Appellant responsible for proper spending and certification, whereas in a normal client and service provider relationship no account is given for the amount received, so the grant is more in the nature of reimbursement than consideration - The Revenue brought no evidence that the Appellant provided Business Exhibition Service or raised any invoice and received consideration, and the agreements did not specify any such work. Following the Supreme Court, service tax is to be paid only on services actually provided and valuation cannot exceed consideration paid as quid pro quo for such service. The Tribunal decisions holding that there is no service provider-client relationship in case of grants-in-aid are squarely applicable - The confirmed demand on the grants is set aside on merits – The appeal is allowed - Extended period of limitation on non-payment of service tax on grants-in-aid - Appellant, a registered service tax payer, accounted for the grants and the expenditure in its books of account and audited accounts, on the basis of which the demand was quantified, and the extended period was invoked - Whether the extended period of limitation can be invoked - HELD - The Appellant had been paying service tax on various services, had accounted for receipt of the grants and the expenditure in its books, and the Revenue failed to consider the expenditure incurred, so the Appellant cannot be said to have indulged in suppression with intent to evade service tax. Since the very nature of the grant is that of reimbursement, the Appellant could have entertained a bona fide belief that no service tax is payable, which is fortified by the case laws cited, and no case is made out to fasten liability for the extended period - The demand is also set aside on account of time bar - Demand under reverse charge mechanism where tax was paid under other headings - Revenue neutrality and extended period - Revenue alleged non-payment of service tax on reverse charge basis, whereas the Appellant contended that the tax had been paid under different headings due to mismatch between services while filing returns and that excess tax was paid overall, as shown in reconciliation statements - Whether the demand under reverse charge mechanism and the extended period can be sustained - HELD - Although it is not possible for the Tribunal to verify the figures individually, service tax payable on reverse charge basis would be available to the Appellant as CENVAT credit, resulting in a revenue neutral situation, and all the entries are properly recorded in the books of account, so no case of suppression can be alleged. Where credit is available making the situation revenue neutral the extended period cannot be invoked - The confirmed demand under reverse charge is set aside on account of time bar and the appeal is allowed.
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