2018 (5) TMI 1424 - HC - Service Tax

Recovery of unpaid service tax from the petitioners - transportation services - transportation of Tur Dal - Case of the petitioners is that after introduction of service tax on transportation services to be collected through reverse charge mechanism, the Central Government had exempted such tax on transportation of specified goods under N/N. 33/2004 dated 3.12.2004 - extended period of limitation - Held that - With issuance of exemption notification dated 27.2.2010, it is possible to argue that such exemption would be available only from the date of notification and for the period prior to notification, service tax would have to be levied. This observation would have to be confined to the normal period of limitation prescribed under section 73 of the Finance Act, 1994. Subsection(1) thereof provides that where any service tax has not been levied or paid or has been shortlevied or shortpaid or erroneously refunded, the competent authority within eighteen months (at the relevant time. now substituted by 30 months) from the relevant date. The willful and conscious evasion of duty is the requirement for invoking the extended period of limitation. In the present case, such elements are totally missing - nowhere the non payment of tax can be corelated to fraud, collusion, willful misstatement, suppression of facts or contravention of the statutory provisions by the petitioner with the intent to evade payment of duty. The show cause notices thus which seek to levy such duty for the period beyond the normal period of eighteen months of limitation therefore, cannot survive. Petition disposed off.

Summary

Issues:
Challenge to circular dated 26.2.2010 and show cause notices for recovery of unpaid service tax on transportation of Tur Dal.

Analysis:
The petitioners, Gujarat Pulses Manufacturing Association and its members, challenged a circular issued by the CBEC in 2010 making clarifications in the service tax regime regarding transportation of Tur Dal. They argued that prior to the amendment in the exemption notification, there was a belief that Tur Dal fell under the exemption for transportation of specified goods like fruits and vegetables. The CBEC amended the exemption notification in 2010 to include pulses, including Tur Dal, which exempted service tax on its transportation. However, the issue arose regarding levying service tax for the period before the amendment. The petitioners contended that the extended period of limitation invoked by the authorities in the show cause notices was not justified as there was no willful evasion of duty or fraudulent intent in not paying service tax on Tur Dal transportation before the amendment.

The High Court examined the facts and found that prior to 2010, no service tax was levied on Tur Dal transportation based on the belief that it was covered under the existing exemption notification. The court noted that the extended period of limitation for recovery of unpaid service tax beyond 18 months could only be invoked in cases of fraud, collusion, willful misstatement, suppression of facts, or contravention of statutory provisions to evade payment of duty. In this case, the court found no evidence of willful evasion or fraudulent intent in not paying service tax on Tur Dal transportation before the amendment. The trade did not pay service tax on Tur Dal until 2010, and the department did not dispute this interpretation until the amendment. Therefore, the court concluded that the show cause notices seeking to recover duty beyond the normal limitation period could not be sustained.

The High Court quashed all the impugned show cause notices, except for those covering the period within 18 months from their issuance. The judgment clarified that if any show cause notice fell within the 18-month limitation period, the directions and observations provided in the judgment would not apply. The petition was disposed of based on the court's findings regarding the lack of willful evasion or fraudulent intent in not paying service tax on Tur Dal transportation before the exemption amendment in 2010.