2018 (8) TMI 704 - HC - Service Tax

Extended period of limitation - Section 73 of the Finance Act, 1994 - the fact of rendering of taxable service by the Respondent came to the notice of the Appellant while conducting Audit of the books and accounts of a third party - Held that - The issue as to what would amount to wilful mis-statement or supression of fact has been dealt with by the Supreme Court in Uniworth Textiles Ltd. v CCE, Raipur 2013 (1) TMI 616 - SUPREME COURT wherein it has been held that mere non payment of duties is not equivalent to collusion or wilful mis-statement or supression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be dealt within the normal limitation period and the burden is on Revenue to prove allegation of wilful mis-statement. In the case at hand also, the CSIDC is an entity under the control of the Government of Chhattisgarh. It does not belong to an individual who would evade tax to corner profit in its business activity - The explanation putforth by the CSIDC that it was under bona fide impression that being an entity under the control of Government it was not liable to pay service tax appears to be reasonable explanation, therefore, mere non registration under Section 65 or non payment of service tax on the maintenance charges collected from industries would not amount to wilful supression or mis-statement of fact, hence, the CESTAT has rightly held that the present is a case where the Revenue is not entitled to invoke the extended period of limitation - decided against Revenue. Maintainability of the cross-objection filed by the respondent - appeal to High Court against an order passed in appeal by the Appellate Tribunal - Section 35G(9) of the Act, 1944 - Held that - In appeal under Section 35G of the Act, 1944 the provisions of the CPC relating to appeals to the High Court shall apply, therefore, by necessary consequence the provisions contained in Order 41 Rule 22 of the CPC would also apply because the said provision otherwise applies to appeals to the High Court under the CPC. - cross-objection filed by the respondent is maintainable. Appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Whether the CESTAT was correct in holding that the extended period cannot be invoked as stipulated in the proviso to Section 73 of the Finance Act, 1994.
2. Whether the cross-objection filed by the respondent is maintainable by virtue of Section 35G(9) of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Extended Period Invocation under Section 73:

The Revenue's appeal questioned the CESTAT's decision to disallow the extended period for service tax recovery under Section 73 of the Finance Act, 1994. The respondent, Chhattisgarh State Industrial Development Corporation Limited (CSIDC), did not register under Section 65 of the Act and failed to pay service tax despite collecting charges from lessees. The Revenue argued this was a case of wilful default justifying the extended period.

The respondent countered, asserting there was no wilful suppression or intent to evade tax, citing their status as a government undertaking and a bona fide belief of exemption based on a circular by the Central Board of Excise and Customs (Circular No.89/7/2006-ST). The Revenue referred to another circular (No.192/02/2016-Service Tax) clarifying that services provided by the government or local authorities against consideration are taxable.

The Court referenced the Supreme Court's rulings in Uniworth Textiles Ltd. v CCE, Raipur and Anand Nishikawa Co. Ltd. v Commissioner of Central Excise, Meerut, emphasizing that mere non-payment or inadvertent non-compliance does not equate to wilful suppression or mis-statement. The burden of proof lies with the Revenue to establish wilful mis-statement.

Given CSIDC's government affiliation and reasonable explanation for non-compliance, the Court concluded there was no deliberate intent to evade tax. Thus, the CESTAT correctly disallowed the extended period invocation. The first substantial question of law was answered against the Revenue.

2. Maintainability of Cross-Objection under Section 35G(9):

The respondent's cross-objection's maintainability was examined under Section 35G(9) of the Central Excise Act, 1944, which applies the Code of Civil Procedure (CPC) provisions to appeals. Consequently, Order 41 Rule 22 of the CPC, allowing respondents to support the judgment on any ground decided against them, was applicable.

The Supreme Court's decision in Bhanu Kumar Shastri v Mohanlal Sukhadia and Others affirmed that respondents could challenge adverse findings without filing a separate appeal, supporting the cross-objection's maintainability.

However, the respondent's counsel failed to present any new substantial question of law regarding their liability to pay service tax. The Court reiterated that the services provided by CSIDC were taxable, referencing the relevant circulars and previous findings.

Thus, while the cross-objection was deemed maintainable, it did not affect the merits of the case. The second substantial question of law was answered in favor of the respondent, but the cross-appeal/cross-objection failed on merits.

Conclusion:

Both the Revenue's appeal and the respondent's cross-appeal/cross-objection were dismissed on merits. The CESTAT's decision to disallow the extended period for service tax recovery and the maintainability of the cross-objection were upheld.