Law firm Fox Mandal & Co has moved the Supreme Court challenging a ₹3.9 crore service tax demand arising from proceedings under the pre-GST regime. [Fox Mandal & Company v. Commissioner]
The matter came up briefly before a Bench of Justices PS Narasimha and Alok Aradhe.
During the hearing, counsel for the petitioner informed the Bench that an important annexure relating to the reconciliation issue was missing from the special leave petition (SLP) and sought time to place the document on record. Taking note of the submission, the Court granted two weeks’ time to the petitioner to place additional documents on record and adjourned the matter.
The dispute stems from service tax proceedings initiated against Fox Mandal & Co for the period 2010–11 to 2014–15. The proceedings began with a show cause notice proposing a total demand of about ₹6.9 crore, including service tax and recovery of allegedly irregular CENVAT credit. However, the adjudicating authority later dropped a portion of the demand amounting to roughly ₹3.01 crore.
Tax authorities had alleged that the firm had irregularly availed CENVAT credit, failed to pay service tax on certain transactions and that there were discrepancies between figures reported in service tax returns and those reflected in its financial statements.
The proceedings ultimately led to an adjudication order confirming service tax of ₹2.99 crore against the firm along with recovery of ₹89.63 lakh in CENVAT credit, apart from interest and a small penalty for delayed filing of returns.
Taken together, the liability arising from the proceedings was estimated at about ₹3.9 crore, leading to the present dispute.
Another issue in the case related to the firm’s claim that certain legal services rendered to overseas clients qualified as “export of services”, which would make them exempt from service tax under the Finance Act, 1994. The department disputed this claim, stating that the firm had failed to produce sufficient documentary evidence to establish that the services qualified as exports.
The department also raised objections to certain sponsorship expenses recorded in the firm’s books, treating them as taxable under the reverse charge mechanism.
The matter was subsequently taken to the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad Bench.
In its order, the tribunal partly allowed the firm’s appeal and remanded several issues for fresh consideration by the adjudicating authority.
Among other things, the tribunal noted that the denial of CENVAT credit had been based largely on the firm’s inability to produce original invoices during audit, even though photocopies were later produced during the proceedings. It held that the documents should be verified before rejecting the credit claim.
The tribunal also remanded the issue relating to export of services, observing that the demand had been confirmed largely on the basis of a departmental verification report that had not been disclosed to the assessee during adjudication.
However, the tribunal upheld a limited portion of the demand relating to service tax on sponsorship expenses, noting that the firm itself had recorded the payments as sponsorship in its accounts and had not produced evidence to show they were donations.
Aggrieved by aspects of the tribunal’s ruling in the ₹3.9 crore tax dispute, Fox Mandal & Co has now approached the Supreme Court
Fox Mandal was represented by Advocate Surjendu Sankar Das.