Go Bindas Entertainment Pvt. Ltd. Vs Commissioner of Service Tax (CESTAT Allahabad)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, allowed the appeal of Go Bindas Entertainment Pvt. Ltd. against a service tax demand founded on a mismatch between its financial accounts and ST-3 returns. The company supplied mobile value-added content to telecom operators. The Tribunal held that a difference between accounting figures and service tax returns, without evidence of additional taxable services, cannot by itself justify a demand.
During an audit covering October 2010 to March 2013, the Department compared the company’s trial balance with its ST-3 return for 2012–13. It recorded income of ₹15,27,58,616 in the trial balance against taxable value of ₹13,85,50,047 in the return, alleging a differential amount of ₹1,42,08,569 and service tax of ₹17,56,179. A show-cause notice dated 22 September 2015 alleged suppression of taxable value with intent to evade tax.
The appellant explained that telecom operators supplied billing logs 30–60 days after each month and that invoices could be issued only after receipt of accurate usage data. It stated that the difference arose from provisional entries made by auditors in the financial statements to comply with accounting standards, rather than from unreported invoices or services. The company relied on the treatment of revenue under Accounting Standard 9 (AS-9).
The original adjudicating authority accepted that the company followed prescribed accounting standards, but nevertheless confirmed the demand because it considered the differences in the figures inadequately explained. Interest and penalty were also imposed, and the Commissioner (Appeals) upheld the order. The Tribunal noted that the Revenue’s case remained founded on a comparison of figures rather than independent proof of taxable consideration.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
After hearing both the sides, we find that the appellants, were engaged in providing taxable services under the category of „Development & Supply of Content‟ and were issued a show cause notice dated 22.09.2015, making the following allegations:-
“2. And whereas during the course of audit for the period October‟2010 to March, 2013 conducted by the then Audit Group of the Central Excise Commissionerate, Noida and report submitted vide IAR (SAP) No.129/2013-14 on reconciliation of income figures of development and supply of content for use in telecom services and ST-3 Returns for 2012-13, it is revealed that they had shown income against the said service of Rs.15,27,58,616/- in their trial balance but as per ST-3 Returns, they have paid Service Tax on Rs.13,85,50,047/-. Thus, they have not paid Service Tax on the income of Rs.1,42,08,569/- which comes to Rs.17,56,179/-. It appears that the party deliberately suppressed the value of service provided by them in the ST-3 Returns with the intent to evade payment of duty.”
2. The appellant, during the adjudication provided the following explanation for the difference in balance sheet figures and ST-3 returns:-
“9. It is submitted that we are registered under online information and data base access service and/or retrieval service through computer network (00440153). We are providing Mobile Value Added services to Telecom Operators and our services are covered in continuous supply of services vide notification No.28/2011 dated 01.04.2011. For the purpose of billing, we require billing logs from Telecom Operators and based on which we have to raise our invoices on to the operators. Usually Operators provide such billing logs between 30-60 days from the completion of month. Once we received the correct billing logs, only then we are able to know how much service is used by operator. Operators don‟t accept any other billing mechanism which is not based on their billing logs. Hence all billings are done post receiving logs from operators. Hence, in our case service shall only be treated as Compete and billable only upon receiving the logs from Operator. The difference which is pointed by your goods self is not due to any deviation between ST-3 and billing actually done by Company but is actually attributable to the provisional entry put in by Auditors in the financial records to reflect the compliance with certain accounting standards.”
3. In the impugned order, the Original Adjudicating Authority, while dealing with the said plea of the assessee observed that the document submitted by the party revealed that there is truth in the statement of the party that they were following accounting standards prescribed by Institute of Chartered Accountants of India and notified in Companies Act. It is further found that the standards prescribed under Accounting Standard- 9 (AS-9) were followed. Accounting Standard-9 explains how to recognize income or revenue in the profit & loss account. It also gives circumstances when recognition income or revenue in the profit & loss account. It also gives circumstances when recognition of revenue can be postponed. As per accounting principle, Revenue or income includes any cash or consideration received by the business enterprise in the normal course of its business operation and from the other source. In other words, Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends. However, the benefit has not been extended to the appellant on the ground that the difference of taxable values in terms of above accounting system adopted by the appellant and the assessable value as reflected in ST-3 returns is not tallying. He has observed that where as the appellant has disclosed the assessable value in their ST-3 return as Rs.31.47 crore, the value as per the accounting system comes to around Rs.31.08 crore. Inasmuch as, there is no correct plausible explanation of difference in revenue‟s figures, the adjudicating authority has presumed that the appellant has not correctly paid the service tax and has accordingly confirmed the demand along with confirmation of interest and imposition of penalty. The said order of Original Adjudicating Authority stands upheld by the Commissioner (Appeals) and hence the present appeal.
4. After hearing both the sides duly represented by learned Advocate Shri Kamal Jeet Singh for appellant and learned A.R. Shri Sandeep Kumar Singh, Deputy Commissioner for revenue, we note that the entire case of revenue is based upon the comparison of figures, as pointed out in the balance sheet with the figures reflected in the ST-3 returns. The appellant has explained that such difference has occurred on account of the accounting system as per the Income Tax Law, which explanation, in principle, stands accepted by the lower authorities. Even then the lower authorities have gone ahead and confirmed the demand.
In any case and in view of the declaration, we note that it is well settled law that no demand can be confirmed by comparing the ST-3 return figures with balance sheet figures, in the absence of any evidence to the contrary that income in the balance sheet, if excess, reflects the providing of taxable services. It is the revenue who is making the allegations and as such, the onus to prove said allegation lies very heavily upon the revenue. Inasmuch as, the same has not been done and in view of the foregoing discussions, we find no merits in the revenue‟s stand.
5. Accordingly, the impugned order is set aside and appeal is allowed with consequential relief, as per law.
