Pradeep Jain - Chartered Accountant

Query

(Alex) Posted On: 03 Mar, 2015

Our business is manufacturing Ice cream (CETSH No.21050000). There are 4 manufacturing units (say A,B,C & D) registered as 4 partnership firms in different parts of Kerala having separate registration for Sales Tax, Central Excise, Service Tax and separate PANs. These units are manufacturing Ice cream under common brand name (units are located in rural area –but SSI exemption is not available currently as TO exceeds limits). We are paying Excise Duty after claiming exemption under Notification No.1/2011-C.E. @ 2% and hence no CENVAT credit is available. We are presently facing a service tax issue as described below. During FY 2013-14 unit “A” incurred huge amount on advertisement expenses (celebrity payment and media advertisement) for establishing the brand name in the market (on behalf of all the units). At the end of the FY (i.e. In March 2014) unit “A” issued two service tax invoices as brand promotion services-one each on unit “B & C”(unit “D” was excluded because of loss made during the year) after adding advertisement services to its Service Tax registration certificate. These invoices were raised proportionately based on some internal calculations. Unfortunately we didn’t include these two invoice in the service tax Return filed for the 6 months period ending March 2014 due to some misunderstanding and/or misguidance on the part of employees and management were unaware of this situation. During one month back an intelligence officer from Central excise office visited the office of unit “ A” and found that in the audited Financial statement this brand promotion service charges have been credited in the P & L and verified the corresponding invoice. It is clear from the invoice that service tax have been billed in the invoice and now they have issued a summons u/s 14 of Central Excise Act (made applicable to Service Tax u/s 83 of Finance Act 1994) to produce documents such as audited Financial Statements, copy of Brand promotion service charge invoices etc. My queries in this connection are as follows:- 1. Was there anything wrong ( a) in taking registration as advertisement service provider by the Ice cream manufacturing unit(partnership firm)-some officer orally told us to cancel registration earlier??!! ( b) invoicing other brand name sharing units and taking input service tax credit on advertisement in media and celebrity payment. (We consider this as separate business and hence hope that non availability CENVAT due to availing of exemption notification for ice cream will not affect this. Further we do not want to claim input tax on unit A’s portion of brand promotion expenses.) 2. If queries explained in point one are favorable to us then how to rectify the Service Tax Return (only GTA-reverse tax have been included in the STR) as 90 days of filing the return are already over? 3. What stand should we take while appearing before the intelligence officer as he has already issued a summons? 4. Any other advice in this connection.

There was nothing wrong in taking registration as an advertisement service provider and passing on the cenvat credit as far as Unit A has charged service tax from B and C and has paid the service tax to the government exchequer. The reason for the same being that unit A has passed on credit in the capacity of advertisement service provider. Further, unit A has correctly not availed the cenvat credit of service tax pertaining to its share as the said service was in relation to excisable goods cleared under notification no. 1/2011. We submit that as the time limit to revise the STR has been expired, Unit A may intimate the service tax department by way of letter that they failed to reflect the transactions in STR. {Query replied by: CA Neetu Sukhwani}

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