Service Tax Demand on Advertisement Cost Sharing and Employee Deputation Set Aside: CESTAT Bangalore

Kalyan Jewellers India Ltd Vs Commissioner of Central Tax and Central Excise (CESTAT Bangalore)

Summary: The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal of Kalyan Jewellers India Ltd. against a service tax demand arising from advertisement cost sharing, employee deputation and alleged works contract services. The Tribunal set aside the Commissioner’s order dated 24 March 2023, holding that the extended limitation period could not be invoked on the facts of the case.

The proceedings arose from a show cause notice issued on 30 December 2020 for transactions relating to April 2014 to June 2017. The assessee had recovered part of its advertising expenses and actual salaries of deputed employees from its associated company, Kalyan Jewellers Mini Stores Pvt. Ltd. The Department treated the receipts as consideration for business promotion and manpower supply, and also alleged liability under reverse charge for works contracts.

On limitation, the Tribunal observed that the notice was founded on the assessee’s audited financial statements and accounting records, which had been subject to departmental audits. The accounting treatment of salary reimbursements did not, by itself, establish wilful suppression with intent to evade tax. Accordingly, the extended period was unavailable.

On works contract services, the Tribunal found no evidence of an actual works contract. The assessee had furnished documents supporting labour payments for showroom renovation and interior work, while materials were procured by it. The works contract demand was therefore unsustainable on merits.

Regarding advertisement expenditure, the Tribunal relied on decisions addressing common expenditure and shared advertising costs. It accepted that sharing expenses incurred on advertisements through third-party vendors did not, on these facts, establish a taxable business promotion service rendered by the appellant to its associate.

The Tribunal took a different view on the merits of employee deputation. Applying the Supreme Court ruling in Northern Operating Systems, it considered the manpower supply demand justified in principle. Nevertheless, because the demand for April 2014 to June 2017 was raised through the notice of 30 December 2020 using the extended period, it was held unsustainable on limitation. The appeal was allowed with consequential relief, if any.

Cases Discussed:

• Collector of Central Excise Vs. Chemphar Drugs & Liniments, 1989 (40) ELT 276 (SC) — Deliberate suppression or intent to evade duty is necessary for invoking extended limitation.
• Padmini Products Vs. Collector of Central Excise, 1989 (43) ELT 195 (SC) — Mere failure or negligence, without the requisite intent, does not justify extended limitation.
• Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut, 2005 (188) ELT 149 (SC) — Mere failure to declare information does not establish wilful suppression of facts.
• Commissioner of Central Excise Vs. Steel Cast Ltd., 2011 (21) STR 500 (Guj.) — Cited concerning extended limitation.
• TVS Motor Co. Ltd. Vs. Commissioner of Central Excise, Chennai-III, 2012 (28) STR 127 (Tri.-Chennai) — Cited by Revenue on classification of services.
• Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur, 2013 (288) ELT 161 (SC) — Cited concerning the requirement of intent to evade duty.
• Commissioner of Service Tax Vs. Arvind Mills Ltd., 2014 (35) STR 496 (Guj.) — Deputation of employees to group companies on a cost-sharing basis was considered in relation to manpower supply services.
• AGS Customer Services (India) Pvt. Ltd. Vs. Commissioner of Service Tax, 2014 (6) TMI 1113 (CESTAT Mumbai) — Cited concerning manpower services.
• Computer Sciences Corporation India Pvt. Ltd. Vs. Commissioner of Central Excise, 2015 (37) STR 62 (All.) — Cited concerning deputation and manpower supply.
• Commissioner of Central Excise, Chandigarh Vs. Premier Motor Garage, 2015 (39) STR 490 (Tri.-Delhi) — Cited by Revenue concerning classification of services.
• Naresh Kumar & Co. Pvt. Ltd. Vs. Union of India, 2015 (37) STR 451 (Cal.) — Cited on limitation.
• Simplex Infrastructures Ltd. Vs. Commissioner of Service Tax, Kolkata, 2016 (42) STR 634 (Cal.) — Cited concerning extended limitation.
• Creative Micro System Vs. Commissioner of Customs, Bangalore, 2016 (206) ELT 922 (Tri.-Bang.) — Relied upon concerning information obtained from an assessee’s records and alleged suppression.
• Sunil Forging & Steel Industries Vs. Commissioner of Central Excise, Belapur, 2016 (332) ELT 341 — Cited concerning extended limitation.
• UCN Cable Network Pvt. Ltd. Vs. Commissioner of Central Excise & Customs, Nagpur, 2016 (45) STR 565 (Tri.-Mumbai) — Cited by Revenue concerning suppression.
• Security Guards for Greater Bombay & Thane District Vs. Commissioner of Central Excise, Thane-II, 2017 (51) STR 51 (Tri.-Mumbai) — Cited concerning manpower supply.
• Rajasthan Ex-Servicemen Ltd. Vs. Commissioner of Central Excise, Jaipur-I, 2017 (52) STR 42 (Tri.-Delhi), upheld in 2018 (15) GSTL 328 (Raj.) — Cited by Revenue on suppression and limitation.
• Commissioner of Central Excise Vs. Zee Media Corporation Ltd., 2018 (18) GSTL 32 (All.) — Cited concerning extended limitation.
• Commissioner of Central Excise, Delhi-IV Vs. Batra Associates Ltd., 2018 (363) ELT 670 — Cited concerning limitation.
• Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd., 2018 (10) GSTL 401 (SC) — Reimbursement of expenses and valuation of taxable services.
• Colt Technology Services India Pvt. Ltd. Vs. Commissioner of Service Tax, Delhi, 2019 (29) GSTL 333 (Tri.-Chandigarh) — Cited concerning manpower supply.
• Nissin Brake India Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur-I, 2019 (24) GSTL 563 (Tri.-Delhi) — Cited concerning deputation of employees.
• Super Shiv Shakti Chemical Pvt. Ltd. Vs. Commissioner of Central Excise, Udaipur, 2019 (369) ELT 1279 — Cited concerning limitation.
• Vedanta Ltd. Vs. Commissioner of Central Excise, Tirunelveli, 2019 (28) GSTL 258 — Cited concerning extended limitation.
• Responsive Industries Ltd. (Unit-II) Vs. CCGST & CE, Palghar, 2019 (6) TMI 626 (Bombay High Court) — Cited by Revenue concerning suppression.
• Ruchi Strips & Alloys Ltd. Vs. Commissioner of Central Excise, Indore, 2020 (43) GSTL 530 (Tri.-Delhi) — Sharing common expenditure among group companies was considered in relation to Business Auxiliary Services.
• M.P. Security Force Vs. Commissioner of Central Excise & Service Tax, Bhopal, 2020 (43) GSTL 253 (Tri.-Delhi) — Cited concerning manpower supply.
• Target Corporation India Pvt. Ltd. Vs. CCE, Bangalore-III, 2021 (52) GSTL 164 (Tri.-Bang.) — Cited concerning secondment and manpower supply.
• Gurubani Security Pvt. Ltd. Vs. Principal Additional Director General, DGGSTI, 2021 (51) GSTL 404 (Tri.-Delhi) — Cited concerning manpower supply.
• Anand Automation Ltd. Vs. Commissioner of Service Tax, Delhi, 2022 (59) GSTL 66 (Tri.-Delhi) — Cited concerning manpower services.
• C.C., C.E. & S.T., Bangalore Vs. Northern Operating Systems Pvt. Ltd., 2022 (61) GSTL 129 (SC) — Relied upon concerning taxability of secondment arrangements and non-applicability of extended limitation.
• Dell International Services India Pvt. Ltd. Vs. Commissioner of Central Excise and Customs, 2023 (73) GSTL 369 (Tri.-Bang.) — Cited concerning secondment and manpower services.
• ABC Consultants Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai, Final Order No. 40653/2023 dated 04.08.2023 — Cited concerning advertisement expenditure.
• S.K. Cars India Pvt. Ltd. Vs. Commissioner of GST & Central Excise, Salem, cited as (2024) 22 Centax 544 — Relied upon concerning reimbursement of advertisement expenses. Reporter citation requires reconciliation with the available 2023 order.
• Fuji Furukawa Engineering and Construction Co. Vs. Commissioner of Central Tax, Bangalore, (2024) 22 Centax 206 (Tri.-Bang.) — Cited concerning manpower services and limitation.
• Halcrow Consulting India Pvt. Ltd. Vs. Commissioner of Service Tax, (2024) 22 Centax 541 (Tri.-Delhi) — Cited concerning secondment.
• KSPG Automotive India Pvt. Ltd. Vs. Commissioner of Service Tax-I, 2024 (4) TMI 682 (Tri.-Mumbai) — Cited concerning manpower services.
• Renault Nissan Automotive India Pvt. Ltd. Vs. Commissioner of GST & Central Excise, (2024) 15 Centax 23 (Tri.-Chennai) — Cited concerning secondment.
• Commissioner of Central Tax, Cochin Vs. Kalyan Jewellers India Pvt. Ltd., (2025) 34 Centax 111 (SC) — Cited concerning limitation and departmental knowledge.
• Delphi Automotive Systems Pvt. Ltd. Vs. Commissioner of Service Tax, 2025 (7) TMI 1137 (Tri.-Chandigarh) — Cited concerning manpower services.
• Daimler India Commercial Vehicles Ltd. Vs. Commissioner of CGST & Central Excise, 2025 (7) TMI 148 (Tri.-Chennai) — Cited concerning secondment.
• Hindustan Construction Company Ltd. Vs. Commissioner of CGST, (2025) 27 Centax 299 (Tri.-Bom.), affirmed in (2025) 27 Centax 300 (SC) — Mentioned in the quoted reasoning in G.R. Thangamaligai concerning reimbursement and absence of consideration.
• G.R. Thangamaligai Vs. Commissioner of GST & Central Excise, Chennai, Final Order No. 40407/2026 dated 20.03.2026 — Relied upon concerning joint advertising expenditure and cost sharing.
• Tesco Bengaluru Pvt. Ltd. Vs. Commissioner of Central Excise and Service Tax, (2026) 38 Centax 241 (Tri.-Bang.) — Cited concerning secondment.
• Jain & Company Vs. Commissioner of Central Excise & CGST, Meerut-I, 2026 (7) TMI 237 (CESTAT Allahabad) — Cited by Revenue concerning suppression and limitation.

FULL TEXT OF THE CESTAT BANGALORE ORDER

The issue in the present appeal is demand of service tax under the category of ‘Business Promotion Service’, ‘Manpower Supply Service’ and ‘Works contract service” under reverse charge mechanism (RCM).

2. The brief facts are alleging short payment of service tax, proceedings were initiated and show cause notice was issued on 30.12.2020. Thereafter Adjudication authority as per the impugned order confirmed the demands under various service categories along with interest and also imposed penalty under various provisions of Finance Act, 1994. Aggrieved by said order, present appeal is filed.

3. When the appeal came up for hearing, as regards demand under the category of ‘manpower service’, Learned Consultant submits that M/s. Kalyan Jewellers Mini Stores Private Limited (KJMSPL/ KJMS) is an associated concern of the Appellant. KJMSPL deals exclusively in jewellery manufactured by the Appellant and some of the employees of the appellant were deputed to KJMS to carry out certain works and their actual salary amount is received from them as reimbursement and no margin is added to this amount and the same has been credited to salary expenses, since these employees are on the pay role of the appellant, which the department also admits. The amount received is nothing but reimbursement of salary and not an amount collected towards rendering ‘manpower supply service’ as held by the learned adjudicating authority. However, alleging that such receipt of salary is under the category of ‘manpower supply service’, demand was made. Learned Consultant submits that the amount received is nothing but reimbursement of salary and not an amount collected towards rendering ‘manpower supply service’. In this regard, Learned Consultant relied on the following decisions:-

i. Target Corporation India Pvt. Ltd., Vs. C.C.E., Bangalore – III – 2021 [52] G.S.T.L.164 [Tri. Bang.] .

ii. The Hon’ble High Court of Gujarat in the case of Commissioner of Service Tax Vs. Arvind Mills Ltd., 2014 (35) S.T.R. 496.

iii. Computer Sciences Corporation India P. Ltd., – 2015 (37) S.T.R. 62 (All.) the Hon’ble Allahabad.

iv. Anand Automation Ltd Vs. Commr of Service Tax., Delhi – 2022 (59) G.S.T.L. 66 (Tri. – Del.).

v. Ruchi Strips & Alloys Ltd. Vs. Commissioner of C.Ex., Indore -2020 [43] G.S.T.L 530 [Tri.-Del.].

vi. Nissin Brake India Pvt. Ltd. Vs. Commissioner of C.Ex., Jaipur -1 – 2019[24]G.S.T.L 563 [Tri. Del.].

vii. Commr. of Central Excise Vs. Computer Sciences Corpn. India P. Ltd. – 2015[37] S.T.R.62[All.].

viii. Colt Technology Services India Pvt. Ltd. Vs. Commr. of S.T., Delhi- 2019 (29) G.S.T.L. 333 (Tri. – Chan.).

ix. Gurubani Secutiry Pvt. Ltd. Vs. Pr. Addl. Dir. General [Adj.]DGGST1, New Delhi-2021[51]G.S.T.L.404 [Tri.-Del]

x. Security Guards for Greater Bom. & Thane Dist. Vs. CCE, Thane-II – 2017 (51) S.T.R. 51 (Tri. – Mum.).

xi. M. P. Security Force Vs. Commissioner of Central Excise & S.T., Bhopal – 2020 [43] G.S.T.L.253[Tri. – Del.].

4. As regards the demand under the category of ‘works contract service’, Learned Consultant submits that as per Notification No.30/2012-ST dated 20.06.2012, in case of works contract rendered by individual or HUF or partnership concern other than a Private Limited or Limited Company and if the recipient is a corporate entity, then they are liable to pay 50% service tax on the service portion in the works contract undertaken by the individual/ partnership firm. In present case, Adjudication Authority has assumed that Appellant had given contract to third party to provide service with material, as a result came to an erroneous conclusion that Appellant is liable to pay service tax on works contract under reverse charge mechanism (RCM). In this regard, Learned Consultant submits that books of account were audited for the period from 2014-15 and 2015-16 on 09 to 13 of May 2016 and as per Report No. 165/2015-16 STA CLT CRL-II dated 18.07.2016 demand was raised for payment of service tax under reverse charge mechanism (RCM) and the appellant paid the same with interest. However, unsustainable allegations are made in the impugned order under works contract on the expenses relating to labour charges and it is not towards any works contract service. Appellant have incurred expenses towards interior work, renovation of show rooms at various places in India by engaging local workers. Appellant have paid them labour charges calculated based on the number of days they worked and the materials were procured by the appellant only. However, it was rejected on the ground that documents are handwritten and on print out documents prepared by the Appellant and that it does not bear the seal and sign. In this regard, Learned Consultant submits that in the respective branches, local employees maintain the works list and the works carried out by them based on which payments are made from Head office. Learned Consultant further draws our attention to the sample labour charges and paid vouchers to substantiate their claim that the amount considered by the Revenue taken as works contract is nothing but labour charges only.

5. As regards the demand under advertisement, Learned Consultant submits that it is on advertisement expenses on cost sharing method and also drew our attention to the show cause notice where it is alleged that the appellant has received Rs.16,67,27,871/-, as consideration for sharing the benefits of their advertisement, from another person. The demand is confirmed on the ground that said amount is received towards the activity of promotion of business by the appellant and it is falling under ‘service’ within the meaning of section 65B (44) of the Act. In this regard, Learned consultant submits that Appellant is manufacturing Gold, Silver and Platinum Jewellery and articles, which are sold through their branches PAN India. Appellant had also sold the Jewellery manufactured by them through the branches of their associate concern M/s. Kalyan Jewellers Mini Stores Pvt. Ltd, [KJMS], located in rural arears in various States. As a part of sales promotion, advertisements were given in print media and electronic media. Out of the total expenditure incurred during the period of dispute, they recovered a portion of the advertisement expenses from the KJMS on cost sharing basis. It is not a consideration, and appellant has not promoted the business of KJMS. Appellant sold the Jewellery manufactured by them to KJMS, which in turn was sold through their outlets. KJMS are not selling any third party products.

6. Learned Consultant further submits that Appellant had engaged third parties to carry out advertisements, for which they have charged service tax and debited a portion of the advertisement expenses in KJMS account. The said advertisements were caried out for promoting the jewellery manufactured by the appellant. This is a case of reimbursement of advertisement expenses and there is no relationship of service provider, and recipient and appellant have not carried out any business promotional activities to promote the business of KJMS by any means, so as to attract service tax. Hence, the same will not attract any service tax. In this regard, Learned Consultant also relied on the following decisions:-

i. Richi Strips & Alloys Ltd Vs. Commr of C.Ex, Indore – 2020 (43) GSTL 530 (Tri.- Del).

ii. G. R. thanga Maligai Vs. Commr of GST and C.Ex, Chennai – Final Order No. 40407/2026 dated 20.03.2026.

iii. ABC consultant Pvt. Ltd. Vs. Commr of S.T, Chennai – Final Order No. 40653/2023 dated 04.08.2023.

iv. S. K. Cars Vs. Commr of GST and C.Ex, Salem – (2024) 22 Centax 544 (Tri,Mad)

7. As regards demand confirmed by invoking extended period of limitation, Learned Consultant submits that the demand is also barred by limitation. As per the show cause notice, it is admitted that the demand is made based on the verification of Audited balance sheet and profit and loss account of the company during the financial year. The amount received as reimbursement of advertisement expenses and salary expenses is reported in the audited financials, which the show cause notice itself admits, as the entire details are taken from the Audited Profit and Loss Account and Balance Sheet only. The disputed transactions were duly recorded in their books of accounts duly reported in the statutory financial statements. Appellant were of the bonafide belief and understanding that secondment of employees and cost sharing of advertisement expenses is not a taxable service as it is nothing but reimbursement of expenses. Further books of account was periodically audited by the Central Excise Audit team and last audit was conducted in October 2014 and May 2016 covering the period from April 2012 to March 2016. Thus when entire activity carried out by the appellant was very well known to the Department, no suppression can be alleged on the part of the appellant with an intent to evade payment of service tax. Learned Consultant further submits that mere non declaration or non-payment of tax will not amount to suppression of facts with an intent to evade payment of tax. In this regard, Learned Consultant relied on the following decisions:-

i. Padmini Products Vs. Collector of Central Excise – 1989 (43) ELT 195

ii. Collector of Central Excise Vs. Chemphar Drugs & Liniments – 1989 (40) E.L.T 276 (S.C).

iii. Uniworth Textiles Ltd. Vs Commissioner Of Central Excise, Raipur -2013 (288) E.L.T. 161 (S.C.)

iv. Anand Nishikawa Co. Ltd. Vs Commissioner Of Central Excise, Meerut – 2005 (188) E.L.T. 149 (S.C.)

v. Naresh Kumar & Co. Pvt. Ltd. Vs UOI 2015 (37) S.T.R. 451 (Cal.).

vi. Simplex Infrastructures Ltd. Vs Commissioner Of S.T., Kolkata – 2016 (42) S.T.R. 634 (Cal.).

7. Learned Consultant also relied on the following decisions wherein it is held that extended period cannot be invoked as Revenue got all the information from the records maintained by the appellant in the ordinary course of business and Audits were conducted.

i. Commissioner of Central Tax, Cochin Vs. Kalyan Jewellers India Pvt Ltd – (2025) 34 Centax 111 (SC).

ii. CCE Vs. Zee Media Corporation Ltd – 2018 (18) GSTL 32 (All)

iii. Super Shiv Shakti Chemical Pvt Ltd Vs. CCE, Udaipur – 2019 (369) ELT 1279.

iv. Vedanta Ltd Vs. CCE, Tirunelveli – 2019 (28) GSTL 258

v. CCE, Delhi-IV Vs. Batra Associates Ltd – 2018 (363) ELT 670

vi. Sunil Forging & Steel Ind Vs. CCE, Belapur -2016 (332) ELT 341

vii. CEx Vs. Steel Cast Ltd-2011 (21) STR 500 (Guj)

8. Learned Consultant for the appellant submits that in the case of C.C., C.CE. S&T, Bangalore (Adjudication) Vs. Northern Operating System Pvt. Ltd – 2022 (61) G.S.T.L 129 (SC) the Hon’ble Supreme Court turned down the Revenue’s contention about existence of ‘willful suppression’ of facts or deliberate misstatement and held that Revenue is not justified in invoking extended period of limitation. Learned Consultant also relied on following decisions:

a. Delphi Automotive Systems Pvt. Ltd. Vs. Commissioner of Service Tax [2025 (7) TMI 1137 (Tri – Chandigarh)].

b. Commissioner of Central Tax, North Commissionerate, Bangalore Vs. Fuji Furukawa Engineering and Construction Co., [2024 (5) TMI 372 (Tri-Bang) = (2024) 22 Centax 206 (Tri.-Bang)].

c. Daimler India Commercial      Vehicles          Ltd. Vs. Commissioner of CGST & Central Excise [2025 (7) TMI 148 (Tri-Chennai)].

d. Dell International Services India Pvt.Ltd. Vs. Commissioner of Central Excise and Customs 2023 (73) G.S.T.L. 369 (Tri. – Bang.) = (2023) 5 Centax 111 (Tri. – Bang.).

e. Tesco Bengaluru Pvt. Ltd. Vs. Commissioner of Central Excise and Service Tax (2026) 38 Centax 241 (Tri.- Bang.).

f. Halcrow Consulting India Pvt. Ltd. Vs. Commissioner of Service Tax (2024) 22 Centax 541 (Tri. – Del.)].

g. AGS Customer Services (India) Pvt. Ltd. Vs. Commissioner of Service Tax-[2014 (6) TMI 1113 (Tri-Mum)].

h. KSPG Automotive India Pvt. Ltd. Vs. Commissioner of Service Tax-I [2024 (4) TMI 682 (Tri- Mum)].

i. Renault Nissan Automotive India Pvt. Ltd. Vs. The Commissioner of G.S.T. and Central Excise [2023 (7) TMI 635 (Tri-Chennai) = (2024) 15 Centax 23 (Tri. – Chennai)].

10. Learned Consultant for the appellant submits that as per Section 6 of the Taxation and Other Laws (Relation of Certain Provisions) Act 2020, only notices which falls on due date during the period 20.3.2020 to 29.9.2020 or such other date after 29.9.2020 as the Central Government may, by notification specify the date by which completion of any proceedings or issuance of show cause notice or order should be complied with. In this regard, Learned Consultant drew our attention to the notification G.S.R 601 (E) dated 30.9.2020 which notified the due date as 31.12.2020 and submits that in present case, the due date for issuing show cause notice is 15.02.2020, which is well before the period of 20.03.2020 to 29.09.2020 specified in the Act. Since show cause notice is issued only on 30.12.2020, the entire demand is barred by limitation as detailed below:

11. Learned Authorized Representative (AR) reiterated the finding in the impugned order and submits that M/s. Kalyan Jewellers Mini Stores Private Limited (KJMSPL/ KJMS) is an associated concern of the Appellant. KJMSPL deals exclusively in jewellery manufactured by the Appellant. Appellant supplied manpower to KJMSPL and the amounts received has not been appropriated as income in the Profit & Loss Account, instead the same has been credited to salary expenses. With effect from 01.07.2012, levy and collection of service tax is governed by Section 66B of the Finance Act, 1994. As per this Section, service tax shall be levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 65B (44) of the Act defines service as “any activity carried out by a person for another for consideration, and includes a declared service, the assessee has received certain amount as consideration for promoting their business”. As per Section 65B (51) of the Act, taxable service means any service on which service tax is leviable under Section 66B. It, therefore, appears that the activities of business promotion undertaken by the assessee by permitting their client to be benefited from their advertisement/ business promotion activities, falls within the ambit of “taxable service” in terms of Section 65B(51) of the Act. In the instant case, the appellant has received certain amount as consideration for promoting their customers’ business by transferring benefits of their advertisement/ promotion works. It appears that, by agreeing to utilise the benefits of their advertisement/ business promotion activity, the appellant is actually promoting the business of their client i.e. M/s Kalyan Jewellers Mini Stores Private Limited and adjudication authority rightly confirmed the demand.

12. As regards demand against supply of manpower service, the argument of the Appellant that extended period cannot be invoked as they have submitted Profit & Loss account to the Central Excise Audit conducted on their records during 10/2014 and 05/2016. Learned AR submits that the Appellant did not dispute that the amounts received has not been appropriated as income in the Profit and Loss account, instead the same had been credited to salary expenses, the account salary expenses itself give clear understanding that it pertains to salary paid to the workers/ employees. The act of the Appellant, that is accounting the amounts received in lieu of provision of services under the head salary expenses leaves no scope to the Audit officers to examine nature of said amounts to ascertain applicability of provisions of Finance Act. The Appellant have deliberately accounted, amounts received in lieu of supply of manpower services, under salary expenses to conceal from the concerned officers. Notwithstanding anything above, the Appellant has not submitted any evidence substantiating that the agreements/ vouchers etc., pertaining to salary expenses basis which demand of service tax was made in impugned SCN. Learned AR further submits that even if appellant had provided to the audit officers during 10/2014 and 05/2016, just because audit is conducted it cannot be presumed that all the agreements/ vouchers/ information etc., were disclosed to the audit officers. Therefore, it is not a case that Appellant has disclosed the fact of income received from supply of manpower services to the Audit officers during 10/2014 and 05/2016 and hence suppression of facts, wilful misstatement is clearly established and Adjudication Authority rightly confirmed the demand by invoking extended period of limitation.

13. As regards the demand the activities of advertisement and business promotion, learned AR submits that the Appellant/ manufacturer undertook promotional activities for improving the KJMSPL’s sales network and charged KJMSPL with a consideration in lieu of the benefit received from the exposure through the advertisements. It was solely for the benefit of businesses as it increases the sales of the business. The Appellant accepts the receipt of amounts from KJMSPL. Assuming, without admitting, that the said business promotion and advertisement activities were benefited M/.s KJIL only and not to M/s. KJMSPL, then the reason, for receiving disputed amounts from KJMSPL, is not given by the appellant. Therefore, submissions of the Appellant that Advertisement/ Business promotion activities carried out by them is exclusively for promotion of their business only is not correct, on facts of the case. It is undisputed and unambiguously admitted by the appellant the presence of third parties providing advertisement/ business promotion service. Hence, it is very lucid that Appellant has collected amounts from KJMSPL against the business promotion campaigns run by them by engaging third parties. In fact, it is agreed by the Appellant, they have recovered a portion of the expenditure incurred by them from KJMS which is nothing but reimbursement of expenditure towards rendering any business promotion services. Learned AR further submits that Appellant and KJMSPL are related. Transaction between related parties is more prone to evasion of taxes. The Government thought that tax avoidance takes place in case of transactions of taxable services between the associated enterprises as service tax is not paid, though it is recognised in the books of account as revenue or expenditure by the concerned parties. Learned AR also drew our attention to letter issued by Tax Research Unit vide D.O. F. No.334/1/2008-TRU dated 29.02.2008 in respect of transactions between associated enterprises.

14. Respondent Revenue places reliance on following decisions regarding classification of services:-

(I) Commissioner of Central Excise, Chandigarh Vs. Premier Motor Garage – 2015 (39) S.T.R. 490 (Tri. – Del.)

(II) TVS Motor Co. Ltd. Vs. Commissioner of Central Excise, Chennai-Iii – 2012 (28) S.T.R. 127 (Tri. – Chennai)

15. As regards invocation of extended period and imposition of penalties, Learned AR submits that the amounts received from KJMSPL have not been appropriated as income in the Profit and Loss account, instead the same had been credited to expenses. The Appellant have deliberately accounted, amounts received in lieu of supply of services, under expenses head to conceal from the concerned officers. Therefore, it is not a case that Appellant has disclosed the fact of income received from supply of advertisement services and manpower services to the Audit officers and hence suppression of facts is clearly established. The act of the Appellant, that is accounting the amounts received in lieu of provision of services under the head of expenses leaves no scope to the Audit officers to examine the nature of said amounts to ascertain applicability of provisions of Finance Act. The act of the appellant amounts to wilful misstatement and suppression of facts. Learned AR places reliance on following decisions:

i. Rajasthan Ex-Servicemen Ltd. Vs. Commissioner of C. Ex., Jaipur-I – 2017 (52) S.T.R. 42 (Tri. – Del.) upheld By High Court – 2018 (15) G.S.T.L. 328 (Raj.)

ii. Brahmputra Infrastructure Ltd. Vs. Commr. of Service Tax, Delhi

iii. M/S Jain & Company Vs. Commissioner of Central Excise & CGST, Meerut-I – 2026 (7) TMI 237 – Cestat Allahabad

iv. UCN Cable Network Pvt. Ltd. Vs. Commissioner of C. Ex. & Cus., Nagpur – 2016 (45) S.T.R. 565 (Tri. – Mumbai)

v. Natural Petrochemicals Pvt. Ltd. Vs. Commissioner Ff Central Excise & Service Tax – (2023) 11 Centax 186 (Tri.-Ahmd)

vi. Responsive Industries Ltd. (Unit-Ii) Vs. CCGST & CE, Palghar [2019(6) TMI 626 – Bombay High Court)].

vii. Vodafone Digilink Ltd. VS. Commissioner of Central Excise, Jaipur-II – 2013 (29) S.T.R. 229 (Raj.)

16. Heard both sides and perused the records.

17. As regards the demand confirmed by invoking extended period of limitation, we find that as per the show cause notice, it is admitted that it is based on the verification of audited balance sheet and profit and loss account of the company during the financial year. Appellant’s books of account was periodically audited by the Central Excise audit team and when pointed out that appellant had not discharged service tax on works contract services received by them under RCM during very same period, it was paid by them with interest. Further as per the submission made by the appellant they were of the bonafide belief and understanding that secondment of employees and cost sharing of advertisement expenses is not a taxable service as it is nothing but reimbursement of expenses.

18. The entire show cause notice is based on Appellant’s own records. When all the transactions are duly recorded by the Appellant and when information to issue a show cause notice is gathered from such records, no allegation can be made that Appellant had indulged in willful suppression of facts with an intent to evasion of payment of tax. The issue was considered by this Tribunal in the matter of M/s. Creative Micro System vs CC, Bangalore (2016 (206) E.L.T 922 (Tri. Bang) wherein it is held that when details are taken from the records of the assessee, there is no intention to suppress the facts. Accounting the amounts received in lieu of provision of services under the head salary cannot be considered as a willful suppression of fact and that as non-furnishing of details. In this regard, we find that as per the judgment of the Hon’ble Supreme Court in the matter of M/s. Anand Nishikawa Co. Ltd Vs. Commissioner of Central Excise, Meerut -2005 (188) E.L.T 149 (S.C), mere failure to declare the facts does not amount to willful suppression of facts. Thus, the impugned order confirming demand by invoking extended period of limitation is unsustainable.

19. As regards issue on merit, we find that demand under the category of ‘works contract services’, there is no evidence on record to prove that the appellant had entered into any works contract service. Further the appellant had produced documents related to labour charges and there is no evidence to show that it is towards any works contract service. Thus, demand under the category of works contract services is also unsustainable. As regards the demand under advertisement, issue was considered by the Tribunal in the matter of M/s. Ruchi Strips (Supra) wherein it is held that:-

“6. Regarding a tax liability under “Business Auxiliary Services”, I find that the appellant were getting certain considerations from their sister concern towards common pool expenses, dividend, refund of bond money etc. The appellant pleaded that there are common expenses for facilities like canteen, transportation within their group companies. There is no promotional activities involved in sharing the expenditure. I note that the impugned order simply recorded that all these services tantamount to provisions of services on behalf of the clients and accordingly, the appellants are liable to tax under “Business Auxiliary Services”. It is not clear as to what type of service is being provided by the appellant and on whose behalf. There is no third party involved at all, in the whole transaction. Certain common expenditure towards various facilities like canteen, transportation, etc. were shared among group companies. Such arrangement cannot be considered as activities taxable under “Business Auxiliary Services”. In terms of Section 65(19) of the Finance Act, 1994, there should be either promotion or marketing of service or goods and various other auxiliary support services. In the arrangement, as discussed above, for availing certain facilities, the appellant is sharing expenditure with other group companies. There is no promotion activities in such arrangement. The impugned order did not discuss the legal scope of tax entry applicable to the case in hand and the same is not sustainable”.

20. Further we find that Tribunal in the matter of GR Thangamaligai (supra) held that:

“14. When we examine the admitted facts pertaining to the arrangement between the Appellant and WGC what is discernible is an understanding to collaborate and work jointly to promote the sale of 22 karat gold jewellery by means of advertisement in the media. The fact that the expenditure incurred is being shared between both the parties at a specified percentage as can be gleaned from the agreement fixing the contribution of WGC to the extent of 25% of the ‘Total Spends’ is indicative only of a cost sharing in a joint effort at promotion of such jewellery that is intended to pay dividend to both parties to the agreement. The fact that the Appellant is required to provide the invoice of the vendor who undertakes the activity of such promotion advertising in order for WGC to part with its contribution is indicative of the fact that the Appellant is not providing any service to WGC, rather the expenses incurred in such promotional advertising by engaging the services of a vendor who provides the service of advertisement, is merely being agreed to be shared, with the WGC requiring proof by nature of the invoice of the vendor to release its share of the contribution towards the common cause. Thus, the provision of a sponsorship service as per the definition reproduced above by the appellant to WGC, and that too for a consideration, is absent in the said arrangement.

15. In the aforesaid circumstances, we are of the considered opinion that the Appellant does not render any service, much less the alleged services of sponsorship, when they jointly work in terms of the said Co-Op Agreement. The amount received by the appellant is not a consideration for any service and is clearly the share of the expenses incurred for the promotional advertisement services availed from a third party. Our aforesaid view is also fortified by the decision in Hindustan Construction Company Ltd v. Commissioner of CGST, (2025) 27 Centax 299 (Tri-Bom) which is seen affirmed by the Honourable Supreme Court as reported in Commissioner of CGST, Navi Mumbai v. Hindustan Construction Company Ltd, (2025) 27 Centax 300 (SC)”.

21. Further in the matter of SK Cars India Pvt. Ltd (supra) it is held that:

“4. The other amount which has been subjected to service tax is the reimbursement expenses received towards advertisement charges. The expenses for advertisement which were borne by the appellant was reimbursed by Sundaram finances as well as M/s. Maruti Udyog Pvt. Ltd. The scheme of joint advertisement was adopted in order to reduce the expenses in regard to the advertisement for the sale of cars and loan facility. These expenses were reimbursed by M/s. Maruti Udyog Pvt. Ltd. as well as M/s. Sundaram Finances Ltd. The appellant has not received any consideration and only the expenses were reimbursed. The judgment of the Hon’ble Apex Court in the case of Union of India v. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 (SC) = 2018 (10) G.S.T.L. 401 (S.C.) was relied to argue that reimbursable expenses are not subject to levy of service tax prior to 2015. The decision in the case of Electronics Technology Parks v. CCE and Trivandrum 2021 (7) TMI 1095 = 2022 (56) G.S.T.L. 182 (Tri. – Bang.) was relied to support the above arguments. The Ld. Consultant prayed that the appeal may be allowed.

11. A further demand has been made under the category of Business Auxiliary Services on the reimbursable expenses received by the appellant from M/s. Maruti Udyog Ltd. and M/s. Sundaram Finance Ltd. As per the annexure to the Show Cause Notice is seen that these are nothing but reimbursement of expense for advertisement. The Honourable Supreme Court in the case of Intercontinental Technocrats Ltd. (supra) has held that the reimbursable expenses cannot be subject to levy of service tax. The decision relied by the Ld. AR for the Department has not considered the decision of the Hon’ble Apex Court and hence not applicable.

22. As regards demand under the category of ‘manpower service’, we find that though the appellant is claiming such receipts are reimbursable expenses which is not taxable and relied on catena of decisions to support their claims, we find that issue was considered by Hon’ble Supreme Court in the matter of CC, CE & ST, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd. (Supra) wherein it is categorically held that secondment of employees by overseas entity for purpose of completion of assessee’s job amounts to manpower supply. Following the ratio of the above judgment, adjudication authority rightly confirmed the demand under the category of manpower service. However, we find that in the said judgment, Hon’ble Supreme Court set aside the demand by invoking extended period of limitation. Since the demand in the present appeal under the category of ‘manpower service’ is confirmed, invoking extended period covering the period April 2014 to June 2017, whereas the Show Cause Notice (SCN) was issued on 30.12.2020, the said demand is also unsustainable on limitation.

23. In view of the above discussion, the impugned order is unsustainable and liable to be set aside. Accordingly, the impugned order is set aside, and the appeal is allowed with consequential relief, if any, in accordance with law.

(Order was pronounced in Open Court on 22.10.2026)