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2018 (11) TMI 1221 - AT - Service TaxExtended period of limitation - penalty - appellants collected service tax on Man-power Supply Service but failed to remit the same to Government account - Held that - When the appellants have furnished details on 15.09.2006, then the show-cause notice ought to have been issued within one year from the date of such knowledge received by the department. On the peculiar set of facts presented by appellants on the case, when the department has come to know about the contract agreement between the appellants and their clients, showing details of services rendered by them under Man-power Supply service, the invocation of extended period after 15.09.2006 cannot sustain - the demand for the period 15.09.2006 to 31.03.2008 cannot sustain and requires to be set aside - appeal partly succeeds on the ground of limitation. In identical set of facts, the Hon ble Jurisdictional High Court in the case of M/s. V.N.K. Menon & Co., Vs CESTAT, Chennai 2015 (7) TMI 266 - MADRAS HIGH COURT has upheld the decision of Tribunal which set aside the demand after the date when department came to know about the details. Period prior to 15.09.2006 - Held that - The ingredients of suppression are very much present prior to 15.09.2006. Only pursuant to the investigation conducted not only with appellants but also with many of their clients like M/s. SPIC, M/s. Raddison GRT, M/s. Aircel, etc., did the fact of collection of service tax and the evasion come to light. Discernible, these facts were suppressed from the Department till the investigation. This being so, not only is the extended period invocable up to 15.09.2006 and demand in Annexure-A of the notice sustainable with interest up to that date but the penalty equal to the amount of such revised tax liability is also imposable. Appeal allowed in part.
Issues:
1. Whether the extended period for demanding service tax is justified? 2. Whether the penalties imposed under various sections of the Finance Act, 1994 are valid? 3. Whether the appellants' actions amount to suppression of facts with intent to evade payment of tax? 4. Whether the demand for the period from 15.09.2006 to 31.03.2008 should be set aside? 5. Whether penalties under Section 78 of the Finance Act, 1994 and Section 77 are warranted? Analysis: Issue 1: Extended Period for Demanding Service Tax The appellants contested the extended period for demanding service tax, arguing that they voluntarily disclosed details on 15.09.2006, making the invocation of the extended period improper. They relied on the case of M/s. V.N.K. Menon & Co. to support their contention. The Tribunal agreed with the appellants, citing that the department had knowledge of the appellants' activities after receiving the details in 2006. Therefore, the demand for the period from 15.09.2006 to 31.03.2008 was set aside. Issue 2: Validity of Penalties Imposed The appellants challenged the penalties imposed under various sections of the Finance Act, 1994. The Tribunal found that while the demand for the period prior to 15.09.2006 was justifiable due to suppression of facts, the demand for the subsequent period was set aside. Consequently, the penalties equal to the revised tax liability up to 15.09.2006 were deemed valid, along with the penalty under Section 77 of the Finance Act, 1994. Issue 3: Suppression of Facts The Tribunal determined that suppression of facts was evident before 15.09.2006, as the appellants had not disclosed the collection of service tax until the investigation. The penalties imposed were upheld based on the suppression of facts prior to the date when the department became aware of the details. Issue 4: Setting Aside Demand The demand for the period from 15.09.2006 to 31.03.2008 was set aside by the Tribunal, as the invocation of the extended period after 15.09.2006 was deemed unjustified due to the department's knowledge of the appellants' activities. Issue 5: Penalties under Section 78 and Section 77 The penalties under Section 78 of the Finance Act, 1994 and Section 77 were found to be warranted based on the suppression of facts before 15.09.2006. The penalties equal to the revised tax liability up to that date were upheld by the Tribunal. In conclusion, the Tribunal partially allowed the appeal, setting aside the demand for the period from 15.09.2006 to 31.03.2008, while upholding the penalties imposed under Section 78 and Section 77 for the period prior to 15.09.2006. The decision highlighted the significance of disclosing information to tax authorities and the consequences of suppression of facts in tax matters.
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