Case Details: Challenge Versus Commissioner of GST and Central Excise (2025) 33 Centax 137 (Tri.-Mad)
Judiciary and Counsel Details
- Vasa Seshagiri Rao, Member (T) & Ajayan T.V., Member (J)
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Shri Karthikeyan, Adv., for the Appellant
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Shri Sanjay Kakkar, Authorised Representative, for the Respondent
Facts of the Case
The appellant was engaged in providing taxable services and was subjected to a demand of service tax under Section 73 of the Finance Act, 1994 on the allegation that the trade discounts reflected in its invoices had not actually been passed on to customers. The Department further observed that the profit and loss account of the appellant did not carry any expenditure head titled ‘trade discount allowed’, and accordingly concluded that the discounts claimed in invoices were fictitious. It was contended that the discounts were in fact extended to customers, as evident from individual ledgers and invoices which reflected only the net value after discounts, and that the Commissioner himself had acknowledged this position for subsequent financial years. The appellant also submitted that exempted service turnover and discount values ought to have been excluded while computing the alleged demand, and that the Department’s computation was purely ad hoc. The matter was accordingly placed before the CESTAT.
CESTAT Held
The CESTAT held that the demand of service tax could not be sustained merely on the basis that the appellant’s profit and loss account did not contain a separate expenditure head for trade discounts. It observed that no detailed verification was carried out by the jurisdictional officer to ascertain whether the customers had paid the gross invoice value or only the net value after discount, and in fact the Commissioner had himself recorded that the invoices were consistently net of discounts. The Tribunal further noted that the computation of demand was flawed since exempted service turnover and discount values were wrongly included. It held that any determination of taxable value should have been made on a reasonable and verifiable basis rather than on an ad hoc estimation. Accordingly, the demand of service tax under Section 73 of the Finance Act, 1994 was set aside, reinforcing that mere absence of a specific accounting entry cannot by itself justify levy where contemporaneous records establish that trade discounts were actually passed on to customers.
List of Cases Cited
- Aster Pvt. Ltd. v. Commissioner — 2016 (43) S.T.R. 411 (Tribunal) — Referred [Para 7.8]
- Balajee Machinery v. Commissioner — 2022 (66) G.S.T.L. 440 (Tribunal) — Relied on [Para 25]
- Commissioner v. Okay Glass Industries — 2015 (330) E.L.T. 872 (All.) — Referred [Para 7.8]
- Commissioner v. Surya Vistacom Pvt. Ltd. — 2022 (66) G.S.T.L. 290 (Cal.) — Relied on [Paras 7.6, 29]
- Cranes & Structurals Engineers v. Commissioner — 2017 (347) E.L.T. 112 (Tribunal) — Referred [Para 7.8]
- Meera Glass Industries v. Commissioner — 2024 (5) TMI 410-CESTAT Allahabad — Referred [Para 7.8]
- R. Ramadas v. Joint Commissioner — 2021 (44) G.S.T.L. 258 (Mad.) — Referred [Para 6.5]
- Schwing Stetter India Pvt. Ltd. v. Commissioner — 2024 (4) TMI 559-CESTAT Chennai — Referred [Para 7.8]
- Tiara Advertising v. Union of India — 2019 (30) G.S.T.L. 474 (Telangana) — Relied on [Paras 7.6, 29]
