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2021 (2) TMI 942 - AT - Service TaxInvocation of Extended period of limitation by third SCN - Imposition of penalty on Directors - Cleaning Activity - services to government hospitals, educational institutes and non-commercial organizations, though a sizable portion of the revenue was generated from Sanjay Gandhi Post Graduate Medical Institute, Lucknow SGPGMI - HELD THAT - The Department was aware of the facts when the first show cause notice was issued and, therefore, the extended period of limitation could not have been invoked in the third show cause notice. The Additional Director General has ignored the order passed by the Tribunal on November 20, 2018 on the first and the second show cause notices for the reason that the said notices or the order of the Tribunal had not been submitted by the Appellant. The Appellant in reply to the show cause notice had made a specific reference to the two show cause notices by giving the number and the dates and the order passed by the Tribunal. Even if it is assumed that the Appellant had not placed the two show cause notices and the order passed by the Tribunal, nothing prevented the Additional Director General from perusing the records of the Department for examining the two show cause notices and the order passed by the Tribunal. The Additional Director General could have even asked the Appellant to produce the two show cause notices and the order passed by the Tribunal. The important documents referred to by the Appellant that went to the root of the matter could not have been ignored in this manner. What also needs to be noted is that the amount charged for the exempted service that were provided by the Appellant was being repeatedly shown by the Appellant in the ST-3 returns filed in 2014 and 2015, and it is not a case where the Appellant had suppressed any information from the Department regarding the amount it had charged for the exempted services. It cannot, therefore, be urged that the Appellant had suppressed information or facts from the Department - What is further important to note is that on July 05, 2016, the Department also issued a notice to the Appellant for conducting an audit for the period 2012-13 to 2015-16. The Appellant was required to furnish all the relevant documents, including documents relating to details of the exempted services. The audit report does not mention that the Appellant had provided any service which was not exempted under the various Notifications and the audit report was also approved by the Deputy Commissioner (Audit). A Division Bench of the Tribunal in TRANS ENGINEERS INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE 2015 (9) TMI 787 - CESTAT MUMBAI also examined whether the extended period of limitation could have been invoked when the audit report did not raise any query in respect of the payment of the service tax as alleged in the show cause notice where it was held that Revenue authority cannot invoke the extended period of limitation, when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has miss-stated (sic) or suppressed the facts from the departments. The Additional Director General has also observed that the Appellant had collected the service tax from most of the service recipients, but had mentioned in the ST-3 return that they were exempted services. This finding is also not based on the basis of records as nothing has been brought on the record to indicate that the Appellant had actually collected service tax for the exempted services. Merely because the Appellant collected an amount inclusive of taxes does not mean that service tax was included because there are many other taxes that are required to be paid - thus, it is not possible to sustain the demand of service tax raised against the Appellant as the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not have been invoked. In this view of the matter, penalty could also not have been imposed upon the two Directors of the Appellant. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Invocation of the extended period of limitation. 2. Validity of the third show cause notice. 3. Suppression of facts by the Appellant. 4. Imposition of penalties on the Directors of the Appellant. Detailed Analysis: 1. Invocation of the Extended Period of Limitation: The Tribunal examined whether the extended period of limitation under Section 73(1) of the Finance Act could be invoked. The Tribunal noted that the Department had full knowledge of the Appellant's activities since August 13, 2007, and the extended period could not be invoked repeatedly for the same issue. The Tribunal referenced the Supreme Court's decision in Nizam Sugar Factory, which held that the extended period could not be invoked if the Department was already aware of the facts from previous show cause notices. 2. Validity of the Third Show Cause Notice: The third show cause notice dated November 13, 2019, was issued for the period April 01, 2014, to June 30, 2017, invoking the extended period of limitation. The Tribunal found that the issues raised in this notice were the same as those in the previous two notices, which had already been set aside on the ground of limitation. Therefore, the third notice was also invalid for invoking the extended period. 3. Suppression of Facts by the Appellant: The Additional Director General claimed that the Appellant had suppressed facts by not providing documents during audits and investigations. However, the Tribunal found this to be a bald statement without specific details. The Tribunal emphasized that the Appellant had consistently shown exempted services in their ST-3 returns and had cooperated during audits. The Tribunal also noted that the audit report did not find any discrepancy regarding the exempted services. 4. Imposition of Penalties on the Directors of the Appellant: Given that the demand for service tax was set aside due to the improper invocation of the extended period of limitation, the penalties imposed on the Directors under Section 78A of the Finance Act were also set aside. The Tribunal concluded that penalties could not be justified when the primary demand itself was unsustainable. Conclusion: The Tribunal set aside the impugned order dated December 27, 2019, and allowed all three appeals filed by the Appellant and its Directors. The Tribunal held that the extended period of limitation could not be invoked repeatedly for the same issue, and there was no suppression of facts by the Appellant. Consequently, the penalties imposed on the Directors were also invalidated.
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