2019 (6) TMI 688 - HC - Service Tax

Invocation of Extended period of limitation - Section 73(1) of the Finance Act, 1994 - bonafide belief or not - HELD THAT - The impugned order records the fact that the respondent was under bonafide belief that the Life Insurance Service per se was not exempted service. It was this which resulted in the respondent proceeding to take credit in respect of inputs used in exempted services. The impugned order records the fact that during the course of investigation nothing has been brought on record that there was any intent on the part of the respondent to evade the service tax payable under the Act. Further, the impugned order places reliance upon the letter dated 29th August 2011 addressed by the Commissioner of Service Tax, Mumbai to Joint Secretary of Central Board of Excise and Customs to the effect that the Life Insurance Companies have all availed Cenvat credit under a bonafide belief that they are entitled to the same. It may not be appropriate to invoke the extended period of limitation while raising demands for incorrect availment of Cenvat credit. The impugned order of the Tribunal has made a detailed examination on the issue of limitation and has come to a finding of fact that there was no intent on the part of the respondent to evade the service tax. This finding of fact is not shown to be perverse. Appeal dismissed.

Summary

Issues:
Challenge to order under Section 83 of Finance Act, 1994 and Section 35G of Central Excise Act, 1944 regarding extended period for demands.

Analysis:
The appellant challenged the order passed by the Tribunal, arguing that the extended period of limitation should be applicable in the case. The respondent, engaged in providing Life Insurance Service, was found to offer taxable, non-taxable, and exempted services. The Tribunal held that the respondent was not entitled to input credit for services under the Traditional Golden Year Plan as it was exempted. However, the demand raised for a specific period was considered time-barred due to the respondent's genuine belief in availing Cenvat credit even for exempted services. Consequently, no penalty was imposed under Section 78 of the Finance Act, 1994.

The appellant contested the Tribunal's decision on the limitation period, arguing that the respondent's failure to declare the value of exempted services in their returns indicated an intent to evade duty. However, the Tribunal found that the respondent acted in good faith, supported by industry-wide practices and communications with tax authorities. The Tribunal's detailed examination concluded that there was no intent to evade service tax, leading to the dismissal of the appeal.

The Tribunal's order highlighted the respondent's genuine belief regarding Cenvat credit entitlement and lack of intent to evade taxes. The appellant's argument based on non-declaration of values and audit discovery was refuted, emphasizing the industry's common understanding. The Tribunal's factual finding of no intent to evade tax was deemed valid, resulting in the dismissal of the appeal as it did not raise any substantial legal question.

In conclusion, the appeal challenging the order regarding the extended period for demands under the Finance Act, 1994 and Central Excise Act, 1944 was dismissed by the High Court. The judgment emphasized the respondent's genuine belief, industry practices, and lack of intent to evade taxes as key factors in the decision.