2014 (11) TMI 871 - HC - Service Tax

Invocation of extended period of limitation - No allegation of fraud, collusion, willful misstatement or suppression of facts - Exemption under Notification No. 34/2004-S.T., dated 3-12-2004 - Held that - Only on the examination of accounts maintained by the assessee, the proceedings themselves emanated on the allegation of short payment. It is not denied by the Revenue, that the assessee originally placed reliance on the Exemption Notification, not remitting Service Tax on the freight charges exceeding ₹ 750/-. Further on the allegation that the Exemption Notification would not apply to the case, there is no allegation of fraud, collusion, willful misstatement or suppression of facts. Thus, on the allegation of non-payment arising from the examination of accounts, we do not find that the Revenue would be justified in placing reliance on the extended period for limitation as provided for under Section 73(1) proviso of Finance Act. The proviso under Section 11A of Central Excises and Salt Act, 1944, contains the phrase with intent to evade payment of duty in such person. The provision under Section 73(1) of the Finance Act, is no different from what is contained under Section 11A of Central Excises and Salt Act, 1944; thus, with the requirement of with intent to evade payment of Service Tax, indicating element of deliberate avoidance or evasion, the show cause notice must contain materials to have the benefit of extended limitation. Thus, when the notice contains no such allegation, the Revenue s case cannot be brought under the extended time limit to hold that the proceedings are saved by the extended limitation. In the circumstances, we hold that the notice issued on 16-10-2007, for the period from November, 2005 to May, 2006, is without any jurisdiction. Consequently, any demand of tax, penalty of interest in this case, is without jurisdiction. - Decided against Revenue.

Issues Involved:
1. Consideration of New Grounds by CESTAT
2. Liability to Pay Service Tax on Freight Charges Exceeding Rs. 750
3. Applicability of Exemption Notification No. 34/2004-S.T.
4. Limitation Period for Demand of Service Tax
5. Allegations of Suppression of Facts and Intent to Evade Tax
6. Penalty and Interest under Finance Act, 1994

Detailed Analysis:

1. Consideration of New Grounds by CESTAT:
The Revenue questioned whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was permissible to consider a new ground not raised by the appellant during adjudication or appeal proceedings. The Tribunal had passed an order on a new ground regarding the definition of "Goods Transport Agency" under Section 65(50)(b) of the Finance Act, 1994, which was not initially raised by the assessee.

2. Liability to Pay Service Tax on Freight Charges Exceeding Rs. 750:
The core issue was whether the assessee was liable to pay Service Tax on all consignments transported in a truck to a single consignee with freight value exceeding Rs. 750. The period in question was from November 2005 to May 2006. The Revenue contended that the assessee should have remitted tax for payments exceeding Rs. 750, but the assessee had only paid tax on freight charges exceeding Rs. 1,500.

3. Applicability of Exemption Notification No. 34/2004-S.T.:
Notification No. 34/2004-S.T. granted exemption from Service Tax for consignments transported by road when the gross amount charged was up to Rs. 1,500 or for an individual consignment up to Rs. 750. The Revenue argued that the assessee was not entitled to this exemption for freight charges ranging from Rs. 750 to Rs. 1,500, as the exemption applied to individual consignments and not to multiple consignments transported to a single consignee.

4. Limitation Period for Demand of Service Tax:
The assessee argued that the proceedings were hit by the limitation period under Section 73 of the Finance Act, 1994. The show cause notice was issued on 16-10-2007 for the period from November 2005 to May 2006. The Revenue relied on the extended period of limitation under the proviso to Section 73(1), alleging suppression of facts with intent to evade tax.

5. Allegations of Suppression of Facts and Intent to Evade Tax:
The Revenue alleged that the assessee had concealed the fact of freight charges paid over Rs. 750 on individual consignments and had willfully excluded these charges to evade tax. The Commissioner confirmed this view, stating that the assessee had indulged in suppression of facts with the intention to evade payment of tax.

6. Penalty and Interest under Finance Act, 1994:
The Commissioner reduced the penalty under Section 78 of the Finance Act, 1994, to Rs. 7,51,956 and sustained the interest levied under Section 75. The appellate authority rejected the plea of limitation and revenue neutrality, confirming the penalty for willful suppression of facts.

Judgment Summary:

The High Court held that the Tribunal had erred in considering a new ground not raised during the initial proceedings. The Court also found that the Revenue's reliance on the extended period of limitation was unjustified as there was no evidence of fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax. The show cause notice issued on 16-10-2007 was deemed without jurisdiction for the period from November 2005 to May 2006.

The Court concluded that any demand for tax, penalty, or interest in this case was without jurisdiction. Consequently, the Court did not find it necessary to remand the matter to the Tribunal for reconsideration of the applicability of the Exemption Notification No. 34/2004-S.T. The Civil Miscellaneous Appeal was ordered accordingly, with no costs.

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