Fox Mandal Moves Supreme Court Against CESTAT Order in ₹3.9 Crore Service Tax Dispute
Fox Mandal Moves Supreme Court Against CESTAT Order in ₹3.9 Crore Service Tax Dispute
Introduction
Fox Mandal & Company has approached the Supreme Court of India challenging an order passed by the Customs Excise and Service Tax Appellate Tribunal in a service tax dispute involving demands of approximately ₹3.9 crore. A Bench comprising Justices Pamidighantam Sri Narasimha and Alok Aradhe has listed the Special Leave Petition for hearing on April 6, after the petitioner sought time to file an additional annexure concerning reconciliation issues raised in the case.
Factual Background
The dispute arises from service tax proceedings initiated against Fox Mandal & Company under the pre-GST indirect tax regime governed by the Finance Act, 1994. During an audit conducted on March 20, 2014, the tax authorities examined the firm’s records for the period between 2010–11 and 2014–15. The audit reportedly identified several discrepancies in the payment of service tax and the availment of CENVAT credit. According to the department, the law firm had allegedly availed and utilised CENVAT credit amounting to ₹89.63 lakh without producing valid documentary evidence.
Procedural Background
Following the audit findings, the tax department issued a show cause notice on December 19, 2016 proposing recovery of approximately ₹6 crore in service tax along with interest and penalties. The notice included allegations of short payment of service tax arising from reconciliation differences between ST-3 returns and financial statements amounting to about ₹1 crore. The department also alleged non-payment of tax on services claimed to be exported, involving about ₹1.80 crore. Further demands were raised on certain transactions including sponsorship services and liabilities under the reverse charge mechanism. On December 20, 2018, the Principal Commissioner of Central GST, Noida confirmed service tax demands of approximately ₹2.99 crore, disallowed the CENVAT credit of ₹89.63 lakh, and imposed interest and penalties while dropping part of the proposed demand.
Issues
1. Whether the denial of CENVAT credit and export benefits by the tax authorities was justified.
2. Whether the service tax demand relating to sponsorship services was legally sustainable.
Contentions of the Parties
Fox Mandal & Company challenged the findings of the adjudicating authority before the CESTAT, arguing that the tax demands were based on incorrect interpretation of records and that the CENVAT credit had been availed legitimately. The firm also disputed the allegations relating to reconciliation differences and export of services.
The tax department maintained that the firm had failed to produce sufficient documentary evidence to justify the availment of CENVAT credit and that certain transactions, including sponsorship services, attracted service tax liability.
Reasoning and Analysis
The CESTAT partly allowed the appeal filed by Fox Mandal & Company. The Tribunal held that issues relating to denial of CENVAT credit and export benefits required further verification of documents and therefore remanded those aspects of the dispute to the adjudicating authority for reconsideration. However, the Tribunal upheld the service tax demand relating to sponsorship services. It observed that the appellant had failed to produce evidence demonstrating that the payments in question were merely donations rather than taxable sponsorship services. Consequently, while granting partial relief to the appellant, the Tribunal sustained certain portions of the demand.
Decision
Aggrieved by the CESTAT’s decision partially upholding the service tax demand while remanding other issues, Fox Mandal & Company has filed a Special Leave Petition before the Supreme Court. The Supreme Court has listed the matter for hearing on April 6, 2026 allowing the petitioner time to place additional documents relating to reconciliation issues raised in the appeal.
