E-magazine

Year – 2021 Edition – 1st E-Magazine प्रतितबंिब 2021 CGST AUDIT II, MUMBAI ZONE

CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS CGST & CENTRAL EXCISE, MUMBAI ZONE CGST AUDIT-II COMMISSIONERATE

CONTENTS SUBJECT PAGE Message i-ii Preface iii-iv Contents 1-2 1. Jurisdictional Map of CGST Audit-II, Mumbai Zone 3-6 2. Performance of CGST Audit-II Commissionerate, 7-14 15-16 Mumbai Zone 3. Place of Provision related detections. 18-22 4. Modus Operandi circulars pursuant to Audit Objections. 23-24 5. Sectoral Audit reports of CGST Audit-II 25-30 a. Financial services 31-36 b. Aviation sector 37 c. Shipping line/Cargo, Warehouses and CHA Services. d. Infrastructure/Constructions, Work Contracts— 38-41 42-45 Objections pertaining to builders specially SRA & Re-development projects. e. Broadcasting/News Media/ Print Media. 6. Data analytics and local risk parameter based Audit. 7. Case Studies on Soft Skills

8. Implementation of e-Office. 46-47 9. Other Success Stories 49-50 a. Republic Day Celebration 51-52 b. Constitution Day Celebration 53-54 c. GST Day Celebration 55-56 d. Independence Day Celebration 57-58 e. Blood Donation Camp f. Swachh Bharat Mission. 59 g. Plantation Drives. 60 h. Vigilance Awareness. 61 i. Training and Capacity building workshop. 62 j. Yoga Day Celebration. 63 k. Pandemic – Management efforts. 64 l. Sanskriti : E-Magazine 65

MESSAGE It gives me immense pleasure to know that CGST Audit-II Commissionerate Mumbai, has come up with E-Magazine“प्रतितबिंब 2021”- the audit compilation covering compliance, performance audit in a comprehensive and lucid manner. 2. The Indirect tax regime has experienced a quantum leap after the adoption of pathbreaking and historical GST reforms in 2017. The department has worked tirelessly to ensure smooth transition to the new system which has brought newer opportunities as well as challenges and Audit formations have a prominent role to play in revenue augmentation and systemic improvement for facilitation and compliance. 3. In the new paradigm of tax regime, Audit processes have undergone significant changes in terms of use of Artificial Intelligence and internet driven tools. On the one hand, Audit function is expected i

to be efficient, time-bound and assessee friendly, while at the same time, it is seen as the instrument to plug leakages and loopholes which have put greater responsibility on the shoulders of the Audit Commissionerates. Therefore, Audit has been rightly recognized as one of the most important pillars of the new tax structure. This in turn has necessitated the departmental officers posted in Audit Commissionerates to innovate and engage with stakeholders and technology partners in constant efforts to make GST Audits innovative and technology driven using AI, IoT and Machine learning tools in conjunction and interplay of Meta datasets, law & procedures to come out with quality Audit Reports. 4. I am optimistic that this endeavour to enhance the competence and efficiency of the Audit officers is an appreciable step in this direction. It will serve as a repository of institutional memory for all the department officers and would enable them to sensitize the field formations about fresher ways to enhance compliance and facilitate in revenue augmentation. 5. I am sure officers of department would find this document useful and motivate Audit formations to work with greater enthusiasm, devotion and keep themselves abreast of the latest developments in the field of audit, accounting for better tax compliance. 6. I congratulate the officers and staff of Mumbai Audit-II Commissionerate for bringing out this compendium and wish them all the very best. -Sd/- (Rakesh Kumar Sharma) Principal Chief Commissioner, CGST & C.Ex., Mumbai Zone. ii

PREFACE प्रतितबंिब 2021 is a humble attempt to channelize and consolidate the existing institutional memory and knowledge in respect of various audits undertaken by this office which have potential of scaling up and have all India ramifications for Audit formations. 2. It covers the performance of the Commissionerate in respect of various Rules and Schemes. It also relies on sectoral issues, procedural and substantive Modus Operandi issues which will enable the Commissionerates to optimize audit yield of similarly placed units and entities. The auditors have extensively used EDW data, AIO data and DGARM red flag indicators to identify risky units. 3. I am feeling elated to place on record that the officers of the Audit-II Commissionerate, Mumbai have also excelled in extra-curricular activities as much as in Audit work. Various Activities like blood donation camps, Swachh Bharat Mission activities, Plantation drives, Vigilance Awareness Week have been celebrated with same enthusiasm and created a conducive work-life environment. iii

4. I am sanguine that this effort of the Commissionerate would go a long way in new era of EDW, third party data inputs, AI and IoT operated module to mine relevant data from GSTN and our GST platforms to conduct audit on real time basis without much intrusion and act as constructive tech-driven fruitful Audit for systemic improvement. 5. I hope this compilation would be useful for all Audit Commissionerates in augmenting GST revenue yield qualitatively and quantitaively. Sd/- (Ramesh Chander) Commissioner, C. Ex. & CGST Audit-II, Mumbai iv

JURISDICTIONAL MAP OF CGST Audit-II, MUMBAI ZONE 1

CGST Audit-II, MUMBAI ZONE 2

PERFORMANCE OF CGST AUDIT-II, MUMBAI ZONE 3

In conventional sense, Audit means scrutiny of the records of assessee and the verification of the actual process of receipt, storage, production and clearance of goods and provision of services with a view to check whether the assessee is paying the duty correctly and following the extant rules. However, apart from ‘compliance audit’ mentioned above, the officers of this Commissionerate also undertake ‘performance audit’ whereby they ensure that not only all the procedural compliances are made but also the duty paid is in accordance with rules & regulation in line with the business processes followed by the assessee. It deters the taxpayers from evading taxes in the name of Tax Planning. This ensures that the quality of audit gets as much preference as quantity of audits & optimizes audit yield. While conducting Audit, the guidelines issued by CAG, DG Audit, and other auditing principles & Auditing & accounting standards are positively adhered to. As a result, the performance of this Commissionerate has been encouraging. The summary of the performance is given below: Performance of CGST Audit-II, Mumbai Commissionerate for last three years at a glance Recoveries Total Recoveries Period No. of Units Detections (Rs. In Lakhs) (Rs. In FY Audited (Rs. In Lakhs) Spot Other Lakhs) 2017-18 FY Recovery Recovery 2018-19 FY 238 18,170.20 8,466.13 213.99 8,680.132 2019-20 FY 610 36,540.02 21,000.47 2,694.22 23,694.69 2020-21 500 40,919.20 13,904.16 3,407.68 17,311.84 179 37340.11 4848.01 441.28 5289.29 4

Audit Paras raised and pendency position as on 31.12.2020 Opening Receipt of Pendency/Months balance as Audit paras Disposal Closing 3-6 6-12 More on up to the up to the month month than 01.04.2020 Month Balance 0-3 Month 1 year 454 486 758 182 135 47 0 0 Details of Show Cause Notices Issued as a result of Audit Objections During April to December, 2020 SCNs issued for No. of SCNs Amount involved in the No. of Paras issued SCNs (Rs. In Lakhs) S.No. Month FY FY FY FY FY FY 2019-20 2020-21 2019- 2020- 2019-20 2020-21 20 21 1 April 28 0 28 0 4181.44 0.00 2 May 3 22 3 9 10613.11 2737.21 3 June 10 89 6 43 5676.40 6134.87 4 July 13 24 10 10 444.62 1795.40 5 August 4 8 4 3 86.29 780.49 6 September 8 82 8 39 116.77 18396.51 7 October 0 64 0 29 0.00 148.08 8 November 0 10 0 4 0.00 615.83 9 December 14 93 14 45 1298.59 3174.86 Total 80 392 73 182 22417.22 33783.25 5

SHOW CAUSE NOTICES ISSUED COMPARATIVE PERFORMANCE FROM APRIL TO DECEMBER OF FY 2019-20 & FY 2020-21 400 350 300 250 337.83 392 224.17 - 2019-20 182 - 2020-21 200 150 100 50 73 80 0 SCN'S ISSUED FOR SCN'S ISSUED AMOUNT INVOLVED NO. OF PARAS IN SCN (Rs. In Crores) 6

PLACE OF PROVISION RELATED DETECTIONS 7 7

BRIEF Section 66B of Finance Act, 1994 enables taxation of only such services as are provided in taxable territory. Thus services that are provided in a non-taxable territory are not chargeable to service tax. Place of Provision of Service Rules have a lot of significance of “Location” of a Service Provider or Receiver for determining taxing jurisdiction it is because in terms of explanation (3) to sub-section 44 of section 65B, an establishment of a person outside the taxable territory is a person distinct from an establishment in a taxable territory. Thus, services provided from overseas are to be carefully judged whether they are being rendered by the establishment outside the taxable territory or within. It is also important because these rules have replaced the ‘Export of Services, Rules, 2005’ and ‘Taxation of Services (Provided from outside India and received in India) Rules, 2006. With the help of these provisions, the officers of this Commissionerate have detected short payment of service tax amounting to Rs. 85.07 crores out of which an amount of Rs. 57.77 crores has been recovered. 8

Place of Provision related Detections Name of the party DAR No. Amount Amount Recovered detection (In Rs.) (In Rs.) AIR MAURITIUS LTD 741/ 2018-19 52,79,11,958 52,79,11,958 Gist of objection:- The assessee is providing Transportation of passenger by air service. The Indian office is looking after the Indian operations. They are not maintaining any accounts in India. Their Balance Sheet is consolidated balance sheet for their global operations. During audit it was noticed from the data produced by the assessee that they have paid service tax only on the value of tickets for outbound journey and not on the entire value of return ticket booked. In this respect, Rule 11 of Place of Provision of Services Rules, 2012 the place where the passenger embarks for continuous journey and service tax is payable on the value of entire ticket. Therefore, the assessee was requested to produce the details of return journey tickets where the passenger has embarked for continuous journey from India. They were requested to pay Service Tax along with applicable Interest RABOBANK INTERNATIONAL 825/ 2018-19 9,10,77,743 4,55,38,872 Gist of objection:- Under the category of Banking and other Financial services, the assessee has charged ‘loan support fees’ from their own branch located in non-taxable territory. No service tax was paid on the same as same was claimed as export of service/ exempted service. It is understood that these fees are recovered from the overseas branch in foreign currency for the certain support services provided to the ‘clients located in India’ on behalf of their overseas branch. Thus, the assessee was facilitating the provision of service between their Overseas Branch in Hong Kong and the Clients in India and was arranging the clients for their overseas branch and processing the client’s loan papers on behalf of their overseas branch which resulted into providing loans to the clients by the Overseas Branch. Hence, the assessee was acting as ‘intermediary’ for their overseas branch. As per the definition of “intermediary” under Rule 2(f) of Place of Provisions of Services Rules, 2012, the ‘Intermediary’ means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account. Further, in terms of Rule 9 (c ) of 9

Place of Provisions of Services Rules, 2012, the place of provision of intermediary service shall be the location of the “service provider”. In the instant case, the assessee is acting as an ‘intermediary’ for their overseas branch, located in India and hence place of provision is in India. Therefore, the assessee was liable to pay service tax on the above transaction. NBA INDIA BASKETBALL PVT. 270/ 2019-20 8,47,69,156 SCN issued LTD. Gist of objection:- M/s NBA India Basketball Pvt Ltd is incorporated in India to promote NBA brand by way of actively promoting Basketball game. Various Basketball events are organized wherein NBA merchandise are used. Therefore various expenses are done in India to promote NBA, USA. Such expenses are recovered from holding company in USA on cost + Margin basis. Such transaction is treated as exports by virtue of Rule 3 of the POP Rules, 2012. Further, the entire Cenvat Credit paid on input service is recovered by way of refund. The Audit noticed that the entire activities of the assessee are carried out in Indian Taxable territory. There was active use of Brand and Merchandise in promotion of brand in India. Both Brand & Merchandise are provided by Holding Company. Such goods are not sold in India. Therefore, the Audit opined that the activity carried out by Assessee appropriately falls under Rule 4(a) of the POP Rules. Accordingly, Service Tax was demanded. HULT BUSINESS CONSULTING 2,22,33,195 SCN issued 38/ 2018-19 PVT. LTD. Gist of objection:- The assessee is claiming exemption under Rule 3 of Place of Provision of Service Rules, 2012 as export of service in respect of Business Auxuiliary Services and are not paying any Service tax thereon. it appears that such claim is incorrect in as much as the Rules of Place of Provision of Service Rules, 2012 to be applied will be Rule 6 which clearly provides that in respect of services relating to events, the place of provision of service will be treated as place where such events are actually held. Since, the place of provision of service is in India as the events envisaged in the Service Agreements have actually taken place in India, therefore, it appears that such services rendered by the assessee to their foreign principal will be taxable at the assessee’s end. The Place of Provision of Service Rules, 2012 came into effect from 01.07.2012 and therefore, these services rendered by the assessee since October, 2014 appears to be taxable. From the foregoing paras and from the definition given under Section 65B(44) of the Finance Act, 19994, it appears that the activity undertaken by HBCSPL falls within the definition of services. Further the activity does not fall under negative list of services given 10

under Section 66D of the Finance Act, 1994 or under Mega exemption Notification No. 25/2012-ST dated 20.06.2012. Therefore, Services provided by HBCSPL are taxable service. The assessee thus appears to have failed to appropriately categorise the services undertaken by them as taxable services as explained above and therefore failed to pay applicable service tax. HBCSPL failed to pay Service Tax (inclusive of Cess) totally amounting to Rs. 2,22,33,195/- for providing taxable service as required under Section 68 of the Chapter V of the Finance Act,1994 read with Rule 6 of the Service Tax Rules 1994. NOVARTIS INDIA LIMITED 297/ 2019-20 2,12,61,202 SCN issued Gist of objection:- During the course of scrutiny of Balance Sheet, Profit & Loss account, ST-3 returns,Service tax reconciliation statement, Export Ledger showing Clinical Trial submitted by the assessee for the period Oct, 2014 to June, 2017, sample invoices claimed as export of services and export service agreements, it is seen that assessee are conducting clinical trials wherein the drugs are supplied by M/s. Novartis Pharma AG, Switzerland and the assessee is raising servicesinvoices in respect of such clinical trial conducted, claiming such transactionsas export of service on the ground that the customer is located in non- taxable territory (located outside India). Such performance based services wherein the goods i.e. drugs are supplied by the recipient of services are aptly classifiable under Rule 4(a) of Place of provision Rules (POPS), 2012. In the instant case, it is seen that the goods (drugs) required for clinical trial are supplied by M/s. Novartis Pharma AG, Switzerlandand the clinical trial in respect of such drugs is carried out by the assessee in taxable territory. Since the services are performed in respect of goods in a taxable territory, they are liable to pay service tax on such services. Therefore, assessee is liable to pay service tax on such services performed in taxable territory. The service tax payable on such transactions works out to Rs.2,12,61,202/-under provision to Section 73(1) of the Finance Act, 1994 alongwith interest under section 75 and penalty under Section 78 of Finance Act, 1994. DHR HOLDING INDIA PVT LTD 1,60,88,361 29,62,316 Gist of objection:- DHR India was appointed as a distributor of M/s Leica Microsystems, Germany on non exclusive basis for development, distribution, installation and various other services for its products and also provide installation and warranty services for the products. For these activities, they got a commission as a percentage of sales of goods from these companies. W.e.f. 01.10.2014, Rule 9 of Place of Provision of Rules, 2012 have been amended. As per amended sub-rule (c) of Rule 9, “Commission income” received on sale of imported goods is 11

made taxable. Assessee also started paying Service Tax on this “Commission income” received from their foreign counterparts / group companies. From the financials and Transfer Pricing reports for the F.Y. 2014-15 and 2015-16, it was observed that, assessee had received Rs. 13,01,64,734/- from M/s Leica Microsystems Germany on accounts of commission for selling / their equipments in India, other than the amount on which the assessee was already paying service tax on which service tax was not paid. The liability on such amount comes to Rs. 1,60,88,361/- DIRECTI WEB 337/2019-20 11,56,455 SCN issued TECHNOLOGY PVT. LTD Gist of objection:- The assessee provides support services in relation to software development, maintenance, system administration, sales and marketing strategy and support, accounts management, human resources and other administrative support services to its associate enterprise P.D.R Solutions FZC(“PDR”). The assessee has provided services to individuals and claimed the benefit of Export on such transaction. The claim for export for such B2C transactions was evaluated under the provisions of POP Rules, 2012. In case of individual the usual place of residence is not available. Therefore by virtue of proviso to Rule 3 of the POP Rules such transactions are taxable and no export benefits is available. DNV GL AS 271/ 2019-20 2,22,126 Para-2 2,22,126 Gist of objection:- Assessee was providing Technical Inspection and Certification Service. During the course of Audit, it has been observed from the financial accounts that the assessee has not paid service tax expenditure viz IT services received from vendors situated at non taxable territory, under RCM vide notification No. 30/2012 dated 25.06.2012. As per Rule 3 of Place of provision rules 2012, the place of provisioning of services is the location of service recipient. The assessee agreed and paid Rs. 2,22,126/- JOHNSON & JOHNSON PVT. 1,23,60,250 SCN issued 532/ 2018-19 LTD. Gist of objection:- During Audit, the assessee submitted clinical trial agreements, Drug Controller letter (India), invoices. Thenarration given on invoices does not mention names of any drug whereas they have received approval of Canagliflozin (Protocol No.28431754DIA3010) only for clinical trial from the Drug Controller.On being asked to clarify for correlation between 12

Drugs tested and invoices issued, they were unable to adduce any evidence. Therefore, it appears that the assessee is not eligible for exemption under Notification No.25/2012 dated 20.06.2012 at serial no.7 for Technical Testing & Analysis for newly developed drugs. In these cases the goods i.e. Pharmaceutical products/drugs supplied by the recipient of services where Technical Testing & Analysis/Clinical Trials are conducted by the assessee either in their own labs or outsourced to private medical institutions in India. Such performance based services aptly falls under Rule 4 of Place of Provision of service, 2012 and therefore the assessee is liable to pay service tax i.r.o such transactions. Further i.r.o Clinical Trials agreement they were not paying service tax stating to be availing the exemption Notification No.25/2012. This exemption has been withdrawn vide Notification no.06/2014 dated 11.07.2014. Thus, post July, 2014 they are liable to pay Service Tax. EDELWEISS CUSTODIAL 22,26,393 SCN issued 58/2017-18 SERVICES LTD Gist of objection:- The assessee has been providing Stock broking services viz, custody of the securities and other Assets of Mutual Funds and settle the financial market transactions with the exchanges for Foreign Institutional Investors through Bombay Stock Exchange/National Sock Exchange. The assessee under these circumstances acts as a custodian of stock. A transaction executed in the process of securities requires involvement of intermediaries like custodians, depository, stock exchange, banks etc. at various stages. Unless the securities are made physically available, the purchase/sale of the same cannot be affected. As the depositories of the securities are located in India, the location of securities will always be India, which is a relevant factor for deciding the taxability of service that is provided to a foreign investor in a remote location, by electronic means, in er to determine the taxing jurisdiction for a service. The terms “Goods” as defined in Sec 65B (25) of the Finance Act,1994, includes securities. The new rules determined the place where a service shall be deemed to be provided, in terms of Section 66C of the Finance Act,1994. ct of goods. Hence, the place of provisioning of the services provided by the assessee must be decided on the basis Rule 4(a) of the POP Rules, 2012. Services declared by the assessee as export of services do not qualify the criteria of exports as mentioned under Rule 96A of Service Tax Rules, 1944 as amended. The services provided by the assessede viz. Custody of Securities etc. to Foreign Investment Investors is in respect of goods. Hence, the place of provisioning of the services provided by the assessee to be decided on the basis of Rule 4(a) of POP Rules, 2012. 13

PENTAGON WATERLINES PVT.LTD. 50/2018-19 8,22,070 8,22,070 Gist of objection:- The assessee is a C&F agent , received Handling Charges from agents outside India, on whose direction assessee co-ordinated with the exporter in India w.r.t. all documentation and other port formalities to facilitate placing of containers on board the ship meant for export and they received income in form of handling charges. The assessee did not pay service tax earlier as they treated income as 'Export of service'. However, it was found that the services provided by the assessee are in the nature of ‘Intermediary Service’ and as per Rule 9 of POP Rules, the location of intermediary is the place of provision of services. The assessee is located in the taxable territory and accordingly they were required to discharge service tax liability on the services provided.The assessee paid the service tax amounting to Rs. 8,22,070/- along with interest Rs. 4,20,200/-. 14

MODUS OPERANDI CIRCULARS PURSUANT TO AUDIT OBJECTIONS 15

MODUS OPERANDI CIRCULARS ISSUED S. No. Name of the Party Amount (In Rs.) 1 SEQUOIA CAPITAL INDIA ADVISOR PVT. LTD. 64,89,66,455 Gist of M.O. The assessee mis-declared the services rendered by them to their Principal classifying the same as Banking & Other Financial Services, whereas audit after carefully going through their agreements and business found that assessee’s activities were found to be appropriately classifiable as ‘Intermediary’ service as defined Rule 2(f) of Place of Provision of Service Rules, 2012 and accordingly Show Cause Cum Demand Notice was issued. This interpretation has been upheld by Maharashtra & Karnataka Appellate Authority for Advance Rulings validating the view taken by this office. 2 B.P EXPLORATION(ALPHA) PVT LTD. 59,76,70,643 Gist of M.O. Service Tax liability under RCM on the concept of “ Right to use natural resources assigned by the Government of India”[vide Notification No. 18/2016 dated 01.03.2016, w.e.f 01.04.2016 ] 3 R G CHANDAK & COMPANY 64,21,779 Gist of M.O. The assessee had suppressed the taxable value by subtracting the ‘Discount passed in invoice’ to the customers of IOCL and paid service tax on ‘Net amount’ which was in contravention to the provisions of the Section 67 of the Finance Act, 1994, resulted in evasion of Service Tax payment for the period from October, 2014 to June, 2017. 4 INDIAN OIL CORPORATION LTD. 29,64,618 Gist of M.O. The assesee was receiving Original Works Contract Service for setting up of Petrol/Diesel dispensing stations. As per the definition of input service under Rule 2 (l) of CCR w.e.f. 1.7.2012, it is evident that the credit of service tax paid on input services pertaining to the works contract services and construction services are excluded and shall be allowed only if they are used for providing the specified servicesi.e.in construction or execution of works contract of a building or a civil structure or part thereof or laying of foundation or making of structures for the support of capital goods. Since the assesse was not in the business of providing the specified services, assessee was not eligible to avail of cenvat credit on Original Works Contract service amounting to Rs. 29,64,618/- 16

SIGNIFICANT SECTORAL AUDIT REPORTS OF CGST AUDIT-II, MUMBAI ZONE a. Financial Services. b. Aviation Sector. c. Shipping Lines/ Cargo, Warehouses & CHA Services. d. Infrastructure/ Construction Services, Work Contract Services. e. Broadcasting / News Media / Print Media 17

A. FINANCIAL SERVICES : Banks, Insurance , NBFC , Insurance Broker S. Name of the party DAR No. Amount No. 1 DEVELOPMENT CREDIT BANK LTD 345/ 2019-20 52,481,400 Gist of observation:- On scrutiny of ledger pertaining to “Other Income” reflected in the Financials, it is noticed that the assessee has received premium of Rs. 34,98,76,000/- towards sale of Priority Sector Lending Certificates (PSLCs) on which service tax has not been paid. All bank are required by RBI to lend to Priority Sector Lending some priority sectors like agriculture, Micro, MSME etc. Some banks are stronger in certain sectors and hence surpass their targets and some bags lag behind. To incentivise the better performing banks RBI introduced PSLC Certificates and allowed trading in them through their portal e-Kuber. As and when the banks lend to priority sector RBI gives them PSLC Certificates which are basically credts for such lending. Once their targets are reached the excess Credits are sold by one bank to another.The loan itself is not sold but only the credit of such loan is sold for a concideration. Since the credit of Loan is only being sold the same will attract payment of Service Tax under the provisions of Section 66E of the Finance Act, 1994 i.e. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.” Herein the Bank is tolerating an act of allowing a third party to take credit of their PSLC for a concideration. 2 DEVELOPMENT CREDIT BANK LTD 345/ 2019-20 2,28,87,157 Gist of observation:- The Bank has provided several types of loans to its customers like Home loan, Agriculture Loans, Business loans, gold loan, etc. All these loans attract a certain amount of interest which is collected from the person availing such loans on a monthly basis. In case the person fails to pay the monthly dues on the appointed date, the bank charges an additional amount as Penal Interest. This amount is charged on the customer over and above the interest due on such loans. The act of the customer of non-payment of EMI on the appointed due date is being tolerated by the Bank for a consideration, which is levy of an additional Penal Interest. This is nothing but a penalty levied on the customer for having defaulted which will attract provisions of Section 66 E(e) of the Finance Act, 1994. 18

3 DEVELOPMENT CREDIT BANK LTD 345/2019-20 56,97,934 Gist of observation:- The assessee was incurring foreign bank charges which the foreign bank levies on bills sent by them for collection on behalf of their customers. These charges are levied by the foreign bank and paid by the assessee to them in foreign currency. Such expenditure incurred attracts payment of service tax under import of service under reverse charge basis. 4 NATIONAL PAYMENTS 85/2017-18 3,89,82,595 CORPORATION OF INDIA Gist of observation:- RuPay cards was introduced in India during the year 2015-16 and are issued by various banks in India and are availing NPCI Switch for Interchange and Switching Fee between the Acquirer and Issuer. M/s NPCI (National Payment Corporation of India) and M/s DFS (Discover Financial Services), USA have entered into a Network-to-Network agreement, wherein international transactions will be internally routed through RuPay and DFS Network. This includes Daily Clearing, Settlement and Dispute Management for RuPay Global Debit and Credit Card used at International ATM/POS as well as DFS Cards used in India. Here M/s NPCI is providing Switch to the NPCI Member banks and M/s DCI. Interchange Fee: Applicable to RuPay Global Card used at DFS ATM locations or DFS Cards used at NPCI member bank ATM locations. Issuing member institution pays it to Acquiring Member Institution as per the USD rate prevailing on the day of settlement. Interchange fee settlement frequency is on daily basis. Payable by Acquirer to Issuer. In this case service tax liability not paid by M/s NPCI Switching Fee-ATM: A processing fee that is applicable on RuPay Global Card used at DFS ATM locations and routed through DFS Network. Switching fee settlement frequency is on daily basis. Payable by Acquirer to NPCI. In this case service tax liability paid by M/s NPCI During the Course of scrutiny of B/S and Ledgers it was observed that the assessee has collected Interchange fee from the India Acquiring Banks to be remitted to Discover Financial Services (DFS). 19

As per Section 66B of the Finance Act, 1994, Service Tax is leviable on 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 person. Further, as per section 65B(44), ‘Service’ means any activity carried out by a person for another for consideration , and include declared service. 5 RABOBANK INTERNATIONAL 825/ 2018-19 4,55,38,872 Gist of observation:- Under the category of Banking and other Financial services, the assessee has charged ‘loan support fees’ from their own branch located in non-taxable territory. No service tax was paid on the same as same was claimed as export of service/ exempted service. It is understood that these fees are recovered from the overseas branch in foreign currency for the certain support services provided to the ‘clients located in India’ on behalf of their overseas branch. Thus, the assessee was facilitating the provision of service between their Overseas Branch in Hong Kong and the Clients in India and was arranging the clients for their overseas branch and processing the client’s loan papers on behalf of their overseas branch which resulted into providing loans to the clients by the Overseas Branch. Hence, the assessee was acting as ‘intermediary’ for their overseas branch. As per the definition of “intermediary” under Rule 2(f) of Place of Provisions of Services Rules, 2012, the ‘Intermediary’ means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account. Further, in terms of Rule 9 (c ) of Place of Provisions of Services Rules, 2012, the place of provision of intermediary service shall be the location of the “service provider”. In the instant case, the assessee is acting as an ‘intermediary’ for their overseas branch, located in India and hence place of provision is in India. Therefore, the assessee was liable to pay service tax on the above transaction. 6 PIRAMAL ENTERPRISES LTD 317/18-19 3,10,36,454 Gist of observation:- M/s. Piramal Enterprises has shifted its focus from the textiles industry, and established its entrepreneurial credentials in Pharma, Information Management, and Financial Services. They are engaged in the manufacture of pharma products and also engaged in providing financial services. They have paid service tax under Business Auxiliary Service, Business support service, Business Management services. During audit it was noticed that the assessee have provided banking and financial services by way of extending loans and 20

earned interest amount. The assessee is also providing other taxable services. They have availed CENVAT credit on input services which are common for all the services provided. It is observed that the assessee have earned considerable amount of interest from the lending business/ by extending loans to the various companies. Therefore, the assessee was required to follow any of the option available under the Rule 6 of CCR, 2004 and to reverse the credit. 7 MAHINDRA INSURANCE BROKERS 273/2019-20 27,17,639 LTD. Gist of observation:- Irregular availment of cenvat credit on the services which has no nexus with the output service: During the course of audit conducted on the records and on verification of the Cenvat documents of the assessee, it was noticed that the assessee had availed Cenvat Credit of input service viz. Staff Welfare, Rent-a-Cab, Vehicle Maintenance, Notice Pay, Repairs & Maintenance. It appears that the said service has no nexus with the output services provided by the assessee and therefore, assessee is not eligible for the Cenvat credit on the said input service as per Rule 2(l) of Cenvat Credit Rules, 2004, and is required to be reversed such wrong credit availed or to pay in cash along with interest in terms of Rule 14 of Cenvat Credit Rules, 2004. 8 AXIS BANK LIMITED 61/2019-20 78,66,891 Gist of observation:- Non-payment of service tax on Notice pay recovery: As per Section 66B of the Finance Act, 1994, Service Tax is leviable 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. Also as per Section 65B (44) of the Finance Act, 1994, service has been defined as under: “Service” means any activity carried out by a person for another for consideration, and includes a declared service” Further, as per Section 66E (e) of the Finance Act, 1994, declared services are set out as under: “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;” The assessee has recovered certain amount from their employee as notice pay for allowing the employee to leave the organization without completing the mandatory Notice period as stipulated in the contract entered between the assessee with the said employee. The said Notice Pay recovery is neither covered under the Negative List of services provided under Section 66D of the Finance Act, 1994 nor exempted as per the exemption Notification No.25/2012-ST dated 20.06.2012 as amended. 21

As the employee has left the assessee’s organization without serving the stipulated Notice period, the said activity of toleration by the employer (the assessee) falls within the ambit of “Declared Service.” It may also be noted that the provision of services by an employee to the employer has only been excluded from the definition of service and not the services provided by an employer to the employee. Also the recovery of notice pay from the employee concerned occurs after the cessation from service and hence no employee- employer relation exists during the course of notice pay recovery. The amount of money collected as Notice Pay recovery from the resigning employee is therefore, in view of the above said provisions, chargeable to service tax at the appropriate rate in terms of Section 66 B read with Section 68 (1) of the Finance Act, 1994 & Rule 6 of Service Tax Rules, 1994. 9 BARCLAYS BANK 88/2018-19 10,89,128 Gist of observation:- Barclays Bank PLC, a bank incorporated in UK (‘BBPLC’) is operating in India through its branches in the states of Maharashtra, New Delhi, Telangana, Tamil Nadu and Karnataka. During audit Cenvat issues such as no nexus, availment of cenvat credit after one year of date of issue of invoice, availment of Cenvat Credit of Swaccha Bharat Cess on certain invoices etc. were observed, which on pointing out were paid by the assessee. 10 CENTRUM DIRECT LIMITED 96/2019-20 60,05,467 Gist of observation:- M/s. Centrum Direct Limited carries out the business of Banking and Financial Services and provides service of money exchange i.e, buying and selling of Foreign Currency. It was observed that in respect of transactions with other authorized forex dealers, the assessee was not discharging any service tax in terms of Section 66D(n)(ii), Negative list of services, of the Finance Act,1994, viz. ‘(ii) inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers’. This activity is not chargeable to service tax under Section 66B ibid and is therefore an exempted service under Rule 2(e) of the Cenvat Credit Rules, 2004, ‘“exempted service” means ..(2) service, on which no service tax is leviable under section 66B of the Finance Act’. The assessee was therefore liable to reverse proportionate Cenvat Credit as per Rule 6(3) of the Cenvat Credit Rules,2004 read with Explanation I (b) of the said Rule and was requested to pay an equivalent amount alongwith applicable interest and penalty in terms of Rule 14 and 15 of the Cenvat Credit Rules, 2004 read with Section 73,75 and 78 of the Finance Act, 1994. 22

B. AVIATION SECTOR S. No. NAME OF THE PARTY DAR No. Amount (in Rs.) 1 JET AIRWAYS INDIA LTD 554/ 61,81,43,631 2018- 2019 Gist of observation:- Short payment of service tax on consideration received towards sale of JP Miles and redemption of JP Miles against tickets by wrongly claiming abatement under Notification No. 26/2012-ST dated 26.06.2012 2 JET AIRWAYS INDIA LTD 554/ 10,67,67,159 2018- 2019 Gist of observation:- Short payment of service tax in respect of advance consideration received towards sale of prepaid tickets sold as assets to subsidiary/associated enterprise by wrongly claiming abatement under Notification No. 26/2012-ST dated 26.06.2012 3 JET AIRWAYS INDIA LTD 554/ 57,750,496 2018- 2019 Gist of observation:- Non-payment or short payment of service tax under RCM in respect of expenditure incurred in foreign currency under Rule 2(1)(d) of Service Tax Rules, 1994. 4 JET AIRWAYS INDIA LTD 554/ 24,451,217 2018- 2019 Gist of observation:- The assessee availed Cenvat credit on inputs exclusively used in providing Transport of Passengers by air services but since the service is provided at abated rate, in terms of Notfn. No. 26/2012-ST dated 20.06.2012, the cenvat credit is not allowed on inputs. Such Cenvat credit need to be reversed. Therefore, SCN was issued. 5 JET AIRWAYS INDIA LTD 554/ 42,41,482 2018- 2019 Gist of observation:- Short payment of service tax on a/c of advance adjustment in respect of invoices raised on M/s JPPL towards redemption of tickets through JP miles. Assessee was doing the payment but at abated rate. However the assessee was liable to pay the service tax at full rate of service tax. Therefore, SCN was issued. 6 JET AIRWAYS INDIA LTD 554/ 25,57,551 2018- 2019 23

Gist of observation:- The assessee provides both Transportation of Passengers by air and Transportation of Goods by air Services. Transportation of goods by air is charged at normal rate while transportation of passenger at abated rate. Therefore, cenvat credit taken on the common Inputs used in providing both the Transport of Passengers by air and Transport of Goods by air Services cannot be availed as Transportation of passengers by air service is being provided at abated rate, in terms of Notfn. No. 26/2012-ST dated 20.06.2012. Therefore such cenvat credit taken on common inputs should be reversed. SCN Issued. 7 AIR MAURITIUS LTD 741/2018-19 52,79,11,958 Gist of observation:- The assessee is providing Transportation of passenger by air service. The Indian office is looking after the Indian operations. They are not maintaining any accounts in India. Their Balance Sheet is consolidated balance sheet for their global operations. During audit it was noticed from the data produced by the assessee that they have paid service tax only on the value of tickets for outbound journey and not on the entire value of return ticket booked. In this respect, Rule 11 of Place of Provision of Services Rules, 2012 the place where the passenger embarks for continuous journey and service tax is payable on the value of entire ticket. Therefore, the assessee was requested to produce the details of return journey tickets where the passenger has embarked for continuous journey from India. They were requested to pay Service Tax along with applicable Interest 8 ETHOPIAN AIRLINES 564/2018-19 20,16,055 Gist of observation:- Consideration of Income from air freight is exempted service for which reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004 was due on monthly basis. However, assessee for the period April 2014 to September 2014 instead on monthly the reversal was done totally in the month of October 2014. On being pointed out Assessee paid interest on the delayed reversal. 9 KENYA AIRWAYS LTD. 261/2018-19 2,21,153 Gist of observation:- As per the month-wise working of the service tax payment provided by the assessee, it was observed that the some of the air tickets issued in the month of March were included in the month of April. Due to this, there was a delay in payment of Service tax and thus, interest on delayed payment was payable. 24

C. SHIPPING LINES/CARGO, WAREHOUSES & CHA SERVICES S.No. Name of the party DAR No. Amount (in Rs.) 1 MSC MEDITERRANEAN SHIPPING 184/2017- 73,89,25,126 CO. S.A. AS MSC AGENCY (INDIA) 18 PVT. LTD. Gist of observation:- The assessee wrongly claimed abatement of 70% under Notfn 26/2012. The assessee is required to pay ST on gross value and not on abated value in view of Board Circular under F. No.354/42/2016-TRU dated 13.04.2017. Therefore, as per Notfn 30/2012-ST and Notfn 26/2012-ST, SCN has been issued to the assessee. 2 MAERSK LINE INDIA PRIVATE 327/2019- 64,63,66,314 LIMITED 20 Gist of observation:- Short payment of Service tax on transportation of goods through vessel: - During the course of Audit it was noticed that some service are classified under the category of “Other Taxable Services – Other than the 119 listed” during the month of Jan.2017 to Mar. 2017.The abatement has been claimed under Notification No. 26/2012 – S. T. stating that services notified under serial number 10 of the notification read with the Notification No. 30/2012- Service Tax, dated 20-06-2012 as amended. Thus the service tax has been paid on the ocean freight import services by claiming abatement of 70%. Further, it was also revealed that the value disclosed in S.T.-3 return for the month of April 2017 is abated value and service tax is paid. As per notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the fulfilment of the condition that CENVAT credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. Further, Circular No.206/4/2017-Service Tax F.No.354/42/2016-TRU dated- 13th April, 2017 issued under F.No.354/42/2016-TRU clarified that abatement will not be available in case of services provided by foreign shipping line, giving the reasons for the same in the said circular. Since service tax paid on abated value 25

3 ESSAR SHIPPING LIMITED 487/18-19 29,02,38,948 Gist of observation:- Non-Payment of Service Tax as declared in ST-3 (Defaulter):Rule 6 (1) of Service Tax Rules, 1994 provides that the Service Tax shall be paid to the credit of the Central Government (i) by the 6th day of the month, if the duty is deposited electronically through internet banking; and (ii) by the 5th day of the month, in any other case, immediately following the calendar month in which the service is deemed to be provided as per the Rules framed in this regard. However, from the records, it has been observed that the assessee has not fully dis-charged the service tax liability for the period 2016-17 and 2017-18 (up-to June, 2017) on the due dates even though they had disclosed the amount of service tax in the ST-3 Returns filed for the above said period. The entire service tax liability is recoverable along-with appropriate interest. On pointing out, the assessee has informed that they had defaulted the payment of service tax from December, 2016 onwards and communicated through various GAR-7 Challans that they had now discharged the entire service tax liability alongwith interest. 4 BAY LINES 180/2018-19 1,40,267 Gist of observation:- M/s. Bay Lines is a foreign shipping company/Principal company (Non Vessel Operating Common Carriers) and M/s. Freight Connection India Pvt. Ltd., (FCIL) an Indian Registered Company are their shipping agent in India. It was observed from the expense ledgers of the assessee that though expenditure on account of transport of goods by road service has been incurred in the year 2014-15, however they had not discharged service tax on the same. As per Notification No. 30/2012-ST dt.20.06.2012 as amended, read with Rule 2(d) of the Service Tax Rules, 1994, wherever such services have been received from non-corporate entities, the Service tax liability under reverse charge mechanism is to be discharged at the recipient end. The 26

assessee was therefore requested to discharge the Service Tax liability in terms of Section 68(2) of the Finance Act, 1994 read with Rule 2(d) & Rule 6 of the Service Tax Rules, 1994, alongwith interest /penalty at applicable rate in terms of Section 75, Section 78 of the Finance Act, 1994. 5 PIL MUMBAI P LTD 107/2017-18 2,85,97,381 Gist of observation:- Non payment of Service Tax on Ocean Freight and short payment on account of wrong availment of abatement under Notfn No.26/12-ST dtd 20.06.12. (SCN issued) 6 ORCHID SHIPPING PVT. LTD. 318 / 2019-20 1,70,41,509 Gist of observation:- During the period 01.06.2016 to 30.06.2017 they have paid service tax on the ocean freight services provided and received by them by claiming abatement of 70% from the value of taxable services. As per notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the condition that CENVAT credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. Further, Circular No. 206/4/2017-Service Tax F.No.354/42/2016-TRU dated- 13th April, 2017 clarified that abatement will not be available in case of foreign shipping line giving the reasons for the same that their Services being exports from their home country are zero rated in their home country and thus has suffered no taxes. Further, the foreign Shipping lines do not get registered in India and do not follow the provisions of Cenvat Credit Rules. Thus, the condition for availing exemption under Notification No-26/2012-ST dated 20.06.2012 (Sr. No.10) is not fulfilled by the foreign Shipping lines. Hence, benefit of conditional exemption will not be available to them and service tax will be paid on full value of services. Thus, the assessee is not entitled for abatement as per the said Notification and is required to discharge the Service tax on the full value of Services provided and received. 27

7 AISSA MARITIME PRIVATE LIMITED 94 /18-19 95,36,877 Gist of observation:- Assessee was providing Steamer Agent Service, Business Auxiliary Service, Business Support Service etc. Prior to 01.06.2016, the service by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India was under negative list. The entry was removed from the negative list with effect from 01.06.2016.As a result of the changes, ocean freight for import consignments upto Indian sea port has become taxable, from 01.06.2016. As a consequence, if the services of a Freight Forwarder / Multimodal Transport operator / Shipping line located in India is availed by an importer in India, service tax would be applicable in the hands of the service provider on the ocean freight received by them. If the service provider is situated outside India, service tax is payable by the Importer, under reverse charge. But if the foreign consignor, engages a foreign shipping line to transport the goods to an Indian Port, even though the place of provision of such service is India (destination of the goods – Rule 10 of the Place of Provision of Service Rules, 2012) no service tax is payable, as per the following Exemption available under S.No. 34 (c) of Notification 25/2012-ST. 34. Services received from a provider of service located in a non taxable territory by - (c) a person located in a non-taxable territory As per above provisions if transport is arranged by the Consignor based out of India through a shipping line based outside India, service tax would not be payable, whereas service tax would be applicable under reverse charge, if+ the Indian importer engages a shipping line based outside India. In order to bring above said service provider and receiver who are located outside India under Service Tax net, Notifications 1/2017 ST and 3/2017 ST dated 21.01.2017, effective from 22.01.2017 were issued. By virtue of these changes, the representative of the foreign shipping line in India, who files the import manifest, was made liable to pay service tax. The assessee not agreed with the objection and SCN was issued. 8 C P WORLD LOGISTICS INDIA PVT. 693/ 2018-19 52,50,030 LTD. Gist of observation:- During the period 01.06.2016 to 30.06.2017 it was noticed that they have paid service tax on the ocean freight services provided and received by them 28

by claiming abatement of 70% from the value of taxable services. As per notification No. 26/2012-ST dated 20.06.2012 (Sl. No. 10), there is an exemption on 70% of value of services of transportation of goods in a vessel subject to the fulfilment of the condition that CENVAT credit on inputs and capital goods used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. Further, Circular No.206/4/2017-Service Tax F.No.354/42/2016-TRU dated- 13th April, 2017 issued under F.No.354/42/2016-TRU clarified that abatement will not be available in case of foreign shipping line giving the reasons for the same that their Services being exports from their home country are zero rated in their home country and thus has suffered no taxes. Further, the foreign Shipping lines do not get registered in India and do not follow the provisions of Cenvat Credit Rules. Thus, the condition for availing exemption under Notification No-26/2012-ST dated 20.06.2012 (Sr. No.10) is not fulfilled by the foreign Shipping lines. Hence, benefit of conditional exemption will not be available to them and service tax will be paid on full value of services. Thus, the assessee is not entitled for abatement as per the said Notification and is required to discharge the Service tax on the full value of Services provided and received. The differential service Tax payable by the assessee is worked out as Rs. 52,50,030/- 9 SAVINO DEL BENE FREIGHT 762/19-20 57,30,365 FORWARDERS PVTLTD Gist of observation:- The assessee is providing ocean freight service. The assessee was not paying service tax on ocean freight service received from shipping lines located outside india, which is payable under reverse charge mechanism. Further, the assessee wrongly claimed abatement of 70% under Notfn 26/2012. Earlier the service was covered in negative list under Section 66D, however the entry was omitted w.e.f. 01.06.2016 and hence the assessee was liable to pay service tax under RCM. Also, the assessee is required to pay ST on gross value and not on abated value in view of Board Circular under F. No.354/42/2016- TRU dated 13.04.2017. Therefore, as per Notfn 30/2012 and Notfn 26/2012, SCN has been issued to the assessee. 10 APT INTERNATIONAL SHIPPING 792/19-20 51,05,598 29

PVT. LTD. Gist of observation:- During the course of scrutiny of P&L A/c/Reconciliation statement & sample dockets of Sea Export it is seen that the transport GTA services received from M/s. Mayur Roadline are further sold to customers with a mark-up and therefore such transactions are not qualified to be a pure agent and the liable to service tax as per provision of Sec 5(2)(7) of Determination of Rules, 2006. 11 P D WAREHOUSING CORPORATION 217/ 2018-19 55,40,016 Gist of observation:- Assessee was providing “Repairs & Maintenance Service”. They were considering supply of Electricity as goods not liable to service tax. However, since the amount recovered is on account of repair and maintenance of electricity supply lines for uninterrupted power supply, and is squarely liable to service tax the amount collected for supply of power is predominantly for Management, Maintenance or Repair service and liable to service tax and not for electricity produced on generators during disruption in supply. 30

D. INFRASTRUCTURE/ CONSTRUCTION SERVICES, WORK CONTRACT SERVICES : Objections Pertaining To Builders especially SRA and Re-development Projects S. DAR No. Amount Name of the party (in Rs.) No. 1 SHETH DEVELOPERS AND REALTORS 159/2018-19 10,47,68,294 (INDIA) LIMITED Para-1 Gist of observation:- M/s. Sheth Developers & Realtors (India) Ltd is providing ‘renting of immovable property’ service. During the course of EA-2000 Audit on the records, it has been noticed that assessee has taken Cenvat Credit of input viz. Cement , capital goods viz. escalators and input services viz. Development /Consultancy Fees , Market Research Charges , Design Consultancy Fees ,Local Architect Fees , Advertising Charges , Survey Fees, Excavation Work ,Labour Charges ,Works Contract Services ,Security Charges ,Professional Charges ,Valuation Fees used in the construction of “Viviana” mall . The accumulated Cenvat credit pertaining to period 2006-07 to 2011-12 has been availed by the assessee in the month of July 2012. 3. Whereas by Circular No.98/1/2008-ST dt. 4th January, 2008, the board has given clarification regarding availability of Cenvat credit paid by the recipient to the service provider of construction services .It has been clarified that, Right to use immovable property is leviable to service tax under renting of immovable property service. Commercial or industrial construction service or works contract service is an input service for the output namely immovable property. Immovable property is neither subjected to central excise duty nor to service tax. Input credit of service tax can be taken only if the output is a 'service' liable to service tax or a 'goods' liable to excise duty. Since immovable property is neither 'service' nor 'goods' as referred to above, input credit cannot be taken. In view of above there is no nexus with the output services i.e. right to use immovable property. The Cenvat credit amounting to Rs. 10,47,68,294/- is required to be reveresed. Assessee not agreed. Therefore, SCN was issued. 2 LUCINA LAND DEVELOPERS LTD 163/2018-19 1,95,04,443 Gist of observation:- M/s. Lucina Lad Development Ltd. is engaged in construction of residential Complex. The unit is a group company of M/s. Indiabulls Group, Mumbai. It is observed that the assessee have received Completion certificate from the competent authority in respect of some of the buildings which were constructed as part of Residential complex. It was also noticed that they had 31

availed CENVAT credit on the input services used for construction of Residential complex. After completion of construction, they had received completion certificate from the appropriate competent authority. As per definition of Input services given under Rule 2(l) of CENVAT Credit Rules, 2004, \"input service\" means any service, used by a provider of taxable service for providing an output service. Further, output service is defined under Rule 2(o) of CENVAT Credit Rules, 2004, \"output service\" means any taxable service provided by a provider of Service located in the taxable territory…. In view of above definitions, services used for construction of unsold flats, which have become non-taxable after receipt of completion certificate, cannot be considered as input services used for providing output taxable service. Therefore, credit availed on such services are not admissible and required to be recovered. 3 ROCKFIRST REAL ESTATE 37/2017-18 1,93,67,527 Gist of observation:- The company is engaged in construction of residential complex having residential complex project at Goa. The unit is a group company of Ashok Piramal Group. It is observed that the assessee have received Completion certificate from the competent authority in respect of some of the buildings which were constructed as part of Residential complex. It was also noticed that they had availed CENVAT credit on the input services used for construction of Residential complex. After completion of construction, they had received completion certificate from the appropriate competent authority. As per definition of Input services given under Rule 2(l) of CENVAT Credit Rules, 2004, \"input service\" means any service, used by a provider of taxable service for providing an output service. Further, output service is defined under Rule 2(o) of CENVAT Credit Rules, 2004, \"output service\" means any taxable service provided by a provider of Service located in the taxable territory…. In view of above definitions, services used for construction of unsold flats, 32

which have become non-taxable after receipt of completion certificate, cannot be considered as input services used for providing output taxable service. Therefore, credit availed on such services are not admissible and required to be recovered. 4 CAPACITY PROJECTS PVT LTD 408/2018-19 1,52,71,864 Gist of observation:- M/s. Capacity Projects Pvt Ltd is a group company of Lodha Group. They are undertaking works contract for construction activity undertaken by the group companies only. During scrutiny of ST 3 returns and GAR 7 challans, it was noticed that there is delayed payment of service tax. Therefore, interest as detailed below is recoverable for delayed payment of ST. During audit it was observed that the assessee has transited the credit of Education Cess, Secondary and higher education cess and Krishi Kalyan Cess in TRAN 1 filed. As per Section 140 of CGST Act, 2017, only ITC eligible under the said act can be transferred under TRAN 1. 5 KAMALA ENTERPRISES 266/2019-20 95,72,498 Gist of observation:- Non-Payment/Reversal of CENVAT credit involved in unsold flats on the date of receipt of completion certificate. SCN issued. 6 KAMALA ENTERPRISES 266/2019-20 75,26,466 Gist of observation:- Non-payment/reversal of Cenvat credit in respect of common input services used in dutiable and exempted services under Rule 6(3) of CCR, 2004: Amount recovered in Cash. 7 KAPSTONE CONSTRUCTIONS PVT. LTD. 81/2017-18 81,67,793 Gist of observation:- The assesse engaged in taxable services viz. Construction services as well as exempt services being construction of unsold flats/shops, selling of scrap, etc., had availed Cenvat Credit in respect of common input services. Cenvat Credit attributable to the value of Exempt Services provided on proportionate basis was recovered durng the course of Audit. 33

8 KAPSTONE CONSTRUCTIONS PVT. LTD. 81/2017-18 32,52,321 Gist of observation:- Retention money has been booked as income in different financial years, on which full Cenvat Credit was taken in the relevant period. Retention amount being an exempted service, hence cenvat credit was inadmissible. The assessee was requested to reverse the proportionate Cenvat credit. Amount was recovered dutring the course of Audit. 9 ATHENA INFRASTRUCTURE LIMITED 51/2017-18 62,95,505 Gist of observation:- Non-Reversal of CENVAT credit involved in unsold flats on the date of receipt of Completion Certificate. During the course of Audit, it was observed that the assessee have received the Occupation Certificate from the Town and Planning Department, Haryana vide Memo No. ZP-617/ SD(BS)/ 2018/11458 dated 04.04.2018. It was also noticed that they have availed CENVAT credit on the input services used for construction. As per definition of declared service given under Section 66E(b) of Finance Act, 1994, construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. As such, after receipt of completion certificate, the activity of sale of flats is not covered under the definition of ‘Service’ given under Section 64 (5)(B)(44) of the Act. Accordingly, stock of unsold flats on the date of completion certificate becomes non-taxable. You had unsold stock of flats on the date of receipt of completion certificate which are not taxable. As per definition of Input services given under Rule 2(l) of CENVAT Credit Rules, 2004, “input service” means any service, used by a provider of taxable service for providing an output service. Further, output service is defined under Rule 2(p) of CENVAT Credit Rules, 2004,“output service” means any taxable service provided by a provider of Service located in the taxable territory…. In view of above definitions, services used for construction of unsold flats, which have become non-taxable after receipt of completion certificate, cannot be considered as input services used for providing output taxable service. Therefore, credit availed on such services are not admissible and required to be recovered. The total amount was worked out to Rs.62,95,505/-. 34

10 NEELKANTH PALM REALITY 34/2017-18 28,89,768 Gist of observation:- The assessee is engaged in construction of residential complex service. It was observed from the P & L Account for the F.Y. 2012-13 that the assessee had shown an ‘Income’ on account of ‘Sale of TDR’ (Transfer of Development Rights) to the tune of Rs. 2,33,80,000/-. On enquiry, the assessee submitted Deed of Transfer of Development Rights agreement dated 28.01.2013 and the relevant ledger account. On its perusal, it was observed that the assessee had sold TDR to the extent of 1086.00 Sq. Mtr, out of total 3200 Sq. Mtrs situated at Village Balkum, Thane to M/s. Neelkanth Mansions and Infrastructure Pvt. Ltd., M.G. Road, Ghatkopar (East), Mumbai and had received the full & final consideration towards sale of TDR on 11.02.2013. In view of Section 65B(44) and Section 66E, it was clear that transfer of land development rights for consideration, is covered under the definition of ‘service’, as it does not involve transfer of title in immovable property, by way of sale, gift, or in any other manner. Moreover, the activity of transfer of land development rights is neither covered under negative list (Section 66D of the Act) nor is it exempted under the mega exemption Notification No.25/2012-Service Tax dated 20.06.2012 as amended. 11 S. B. BROTHERS DEVELOPERS 872/2019-20 12,37,724 Gist of observation:- It was observed that 12 tenements were issued Occupation Certificate on 3.3.2016 and 9 tenements were issued Occupation Certificate on 8.3.2016 by Slum Rehabilitation Authority. Thus, service tax was liable to be paid on these 21 tenements being handed over post-July 2012 to the slum owners. As per Circular F.No.354/311/2015-TRU dated 20/1/2016 issued by CBEC, Service tax is liable to be paid by the builder/developer on the ‘construction service’ involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument(e.g. allotment letter) and in terms of section 67(1)(iii) of the 35

Finance Act,1994 read with rule 3(a) of Service Tax (Determination of Value) Rules, 2006, the value of similar flats as are sold nearer to the date on which land is being made available for construction is to be used for arriving at the value for the purpose of tax. 12 AARAV BUILDCON 249/17-18 4,11,497 Gist of observation:- The assessee is providing Construction Services in respect of Commercial or industrial Buildings & Civil Structures. The assessee had not discharged service tax liability for the period Oct'16 to Jun'17 assigning reason of cash crunch. The same was recovered alongwith interest. Further, it was observed that the assessee had availed credit on “Airodek Scaffolding Systems” (CETH 76109010). As per definition of “Capital Goods’ in terms of Rule 2(a) of CCR, 2004, items covered under CETH 76 are not covered. Hence the amount involved was recovered alongwith interest. 13 G P CORPORATION 228/2017-18 3,35,121 Gist of observation:- Works Contract Service on which supplies made by their clients was not included in the assessable value as they relied on the Bhayana Judgement of S.C. However, the tax on same is payable as per Rule 2A of service tax (Determination of value) Rules, 2006. 14 ACCORD BUILDERS 127/2017-18 1,07,42,263 Gist of observation:- Non Payment of service tax on flats agreed to be provided to retiring partners. They had not paid Service Tax considering it to be service to self, which is not taxable. It was impressed upon them that once the partnership is broken the flats allotted becomes taxable. The flats have to be valued as per Service Tax (Determination of Value) Rules, 2006 and as per Board’s Circular No. 151/2/2012-ST dated February 10, 2012 issued in this regard. 36

E. BROADCASTING / NEWS MEDIA / PRINT MEDIA : S.No. Name of the party DAR No. Amount 1 MEDIACOM COMMUNICATIONS PVT. 18/2020-21 14,05,42,123 LTD. Gist of observation:- The assessee is engaged in rendering “Advertising Agency Services” to their clients. They had booked online advertisement for their clients on foreign media like FB, Twitter, Google etc. and were paying the service provider located abroad for such services but were not paying ST under reverse charge under Notification No. 30/2012-ST dated 20.06.2012 by claiming that they are not the service receiver and are acting as pure agent (to claim benefit under Rule 5 of Service Tax (Determination of Value) Rules, 2006) for the client and book the service for and on behalf of the client. SCN issued. 37

DATA ANALYTICS AND LOCAL RISK PARAMETERS BASED AUDIT 38

This Commissionerate has aptly adopted, adapted and utilized the rapidly developing new analytical tools, datasets and Risk parameters while also using the conventional methods of Audit effectively. After the allotment of assessee to the Group, their Balance Sheets and P & L Sheets are called for online and simultaneously a basic overview of the Company is taken from various open source government websites like gst.gov.in and private websites like zaubacorp.com. After analyzing their Balance Sheets and P & L Account alongwith their ST-3 returns downloaded from ACES or GST returns downloaded from AIO, various ratios like ratio of expenses/ total turnover and whether there is a increase in ratio of exempted supplies/total supplies of a taxpayer over a period of time, identified by the experienced officers of this Commissionerate are calculated in respect of the assessee. Moreover, it is also ensured that the assessee’s previous litigations, if any, are also taken into account. The records of these assessees are also cross checked with the defaulters list available with CCI, SEBI, MCA. The CESTAT & Income Tax Appellate Tribunal are also being contacted for any pending litigation. Intelligence agencies like DGGI, Enforcement Directorate are approached for gathering basic information regarding the assessee or its purchasers or suppliers so 39

that a comprehensive Audit can take place. On the basis of these ratios and information from other institutions, an internal risk score is associated with the assessee so that manpower resources could be judiciously utilized keeping in mind large number of units. Thereafter, the data regarding the assessee are extracted from DGARM and Antarang Portal. These data are then co-related with third party data and AS 26 forms procured from Income Tax department, EDW data, data extracted from BIFA tool of GSTN and other local risk parametersto come out with a proper profile of the assessee. The physical visit at the assessee’s premises commences after all this home-work has been done by the officers. It allows the officers to understand the business processes of the assessee thoroughly and pose them some well thoughtout and relevant queries. Intelligent selection of units was made so that manpower resources could be judiciously utilized keeping in mind large number of units assesses. This targeted approach has led to maximization of audit yield. Further, this Commissionerate has also conducted several drives against defaulters as and when the situation has demanded such action. During Audit, assesses who had not filed ST-3 returns and 40

defaulted in Service tax payments were identified. Since the amount involved and opportunity for audit recovery was huge, the defaulters under GST Audit-II were focussed to augment the Revenue Collections. Some lists were created for monitoring such defaulters. The daily progress was monitored using a Google Excel Doc in which all the assesses have been separately kept in different sheets groups wise for easy update and tracking which resulted in huge recoveries. Moreover, a list of defaulters was circulated by ADG Audit, New Delhi. This list was based on the difference in service tax liability as declared in ST-3 returns and service tax paid. The defaulter verification was carried on war footing. In this regard, a faceless drive was where the groups will just intimate the assessee over email and verify the paid challans which was not reflected in the given report and if any liability was still pending then they were asked to pay them and produce the challans. The soft skills of Audit officers played a vital role in realization of Revenue in an amicable and trust based environment. 41

CASE STUDIES ON SOFT SKILLS IN AUDIT 42