2015 (3) TMI 1051 - HC - Service Tax

Invocation of extended period of limitation - agreement between appellants and broadcasting company was known to department - Suppression of facts or not - Penalty u/s 76 & 78 - Held that - Tribunal was of the view that the Slot Sale Agreement between the first respondent and the broadcasting company was very much known to the department and in this regard, gave a specific finding on fact that there was no suppression of material facts by the first respondent before the department with intent to evade payment of service tax. The finding of the Tribunal, which is the final fact finding authority, cannot be overturned merely based on a plea made in the appeal by the department. This view is fortified by a decision of the Supreme Court in Kushal Fertilisers (P) Ltd. v. Commissioner of Customs & Central Excise, Meerut, 2009 (5) TMI 13 - SUPREME COURT . Tribunal observed that a major part of the demand is covered by the extended period which is not invocable and moreover, there is a dispute on interpretation of the relevant provisions of Section 65 of the Finance Act, 1994. Therefore, the Tribunal, placing reliance on the decision of the Tribunal in Zee Telefilms case 2004 (3) TMI 1 - CESTAT, NEW DELHI , referred supra, vacated the penalty. - there is no suppression of material facts with an intent to evade payment of service tax and education cess, we hold that the Tribunal was justified in vacating the penalty imposed by the adjudicating authority. - Decided against Revenue.

Issues Involved:

1. Whether the Tribunal was correct in setting aside the demand of service tax for the period beyond the normal period of limitation under Section 73 of the Finance Act.
2. Whether the Tribunal was justified in vacating the penalties imposed under Sections 76 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Demand of Service Tax Beyond Normal Period of Limitation

The department issued a show cause notice on 5.10.2006, demanding service tax from the first respondent for the period from 16.7.2001 to 30.4.2005, claiming that the first respondent was rendering broadcasting services without proper registration and payment of service tax. The adjudicating authority confirmed the demand, invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994, citing suppression of facts and wilful intent to evade tax.

However, the Tribunal found that the Slot Sale Agreement between the first respondent and the broadcasting company was known to the department. The Tribunal noted that there was no suppression of material facts by the first respondent with intent to evade payment of service tax. The Tribunal observed that the adjudicating order lacked a detailed reasoning on the issue of suppression and intent to evade tax, merely stating that suppression of facts and wilful intent to evade payment of service tax were established.

The Tribunal concluded that the extended period of limitation could not be invoked and set aside the demand for the extended period, directing the Commissioner to re-quantify the amount for the normal period of limitation.

The High Court upheld the Tribunal's finding, stating that the question of whether there was suppression of facts is a factual determination and the Tribunal, as the final fact-finding authority, had concluded there was no suppression. The High Court emphasized that the department failed to provide substantial evidence to overturn the Tribunal's factual findings.

Issue 2: Vacating of Penalties under Sections 76 and 78

The Tribunal vacated the penalties imposed under Sections 76 to 78 of the Finance Act, 1994, reasoning that the major part of the demand was covered by the extended period, which was not invocable. Additionally, the Tribunal noted that the issue involved was predominantly interpretative in nature, arising from rival interpretations of the relevant provisions of Section 65 of the Finance Act, 1994.

The High Court supported the Tribunal's decision, noting that in the absence of suppression of material facts with intent to evade tax, the penalties were not justifiable. The High Court referenced the Tribunal's reliance on the Zee Telefilms case, where penalties were vacated under similar circumstances.

Conclusion:

The High Court dismissed the department's appeal, finding no substantial question of law arising for consideration. The Tribunal's findings on both the issues were upheld, confirming that the demand for the extended period was not sustainable and the penalties were rightly vacated.

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