2021 (8) TMI 642 - AT - Service Tax

Invocation of extended period of limitation - wilful suppression of facts with an intent to evade payment of service tax, exists or not - necessary ingredients for issuance of SCN, present or not - section 73(1) of the Finance Act, 1994 - HELD THAT - Tribunal in M/S. SHIV-VANI OIL GAS EXPLORATION SERVICES LTD. VERSUS CST, NEW DELHI 2016 (10) TMI 878 - CESTAT NEW DELHI , wherein the Tribunal after making reference to the decision of the Supreme Court in COSMIC DYE CHEMICAL VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY 1994 (9) TMI 86 - SUPREME COURT , observed that there should be an intent to evade payment of service tax if the extended period of limitation has to be invoked. The Commissioner, therefore, fell in error in observing that the appellant had suppressed information from the Department regarding payment of service tax by the appellant on works contract service and availment of CENVAT credit and then holding that mere suppression of facts was enough for invoking the extended period of limitation. Even suppression of facts has to be wilful and in any case, suppression has also to be with an intent to evade payment of service tax. Though, the Commissioner in the last sentence of paragraph 8.6 of the order observed that in any case, the noticee, in this case, has willfully contravened the provisions of the Finance Act , but there is no discussion or reasons given by the Commissioner for so concluding and only a bald statement has been made and that too as an alternative finding. It is not possible to sustain the finding recorded by the Commissioner that the Department was justified in invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act. Also, the proposal in the show cause notice relating to recovery of amount under section 73A of the Finance Act and interest thereon under section 73B of the Finance Act has not been confirmed in the impugned order - It is not possible to accept the contention of the learned Authorised Representatives for the Department that since there was a proposal for recovery of ₹ 2,44,48,095/- under section 73A of the Finance Act in the show cause notice, the said demand can be confirmed in these proceedings, even if the Commissioner has dropped the demand made under section 73(1) of the Finance Act. The imposition of penalty and recovery of interest cannot also be sustained - Such being the position, when the demand could not have been confirmed under section 73(1) of the Finance Act, it will not be necessary to examine the other contentions raised by the learned Counsel for the appellant for quashing the impugned order. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
2. Recovery of CENVAT credit amounting to ?2,44,48,095/-.
3. Imposition of interest and penalty.
4. Validity of pre-deposit made by utilizing CENVAT credit.

Detailed Analysis:

1. Invocation of the Extended Period of Limitation under Section 73(1) of the Finance Act, 1994:
The primary issue was whether the extended period of limitation could be invoked. The appellant argued that the necessary ingredients for invoking the extended period, namely willful suppression of facts with intent to evade payment of service tax, did not exist. The Commissioner had observed that it was possible to invoke the extended period even without intent to evade payment of service tax. However, the Tribunal noted that the Supreme Court and the Delhi High Court had consistently held that suppression of facts must be willful and with intent to evade payment of service tax. The Tribunal concluded that the appellant had not willfully suppressed facts, as the payment of service tax and availment of CENVAT credit were duly reflected in the ST-3 returns. Therefore, the extended period of limitation could not be invoked.

2. Recovery of CENVAT Credit Amounting to ?2,44,48,095/-:
The Commissioner had confirmed the recovery of CENVAT credit on the grounds that the services provided by the appellant were exempt and hence, the input services did not qualify for CENVAT credit. The appellant contended that it had discharged service tax under 'works contract service' and was eligible to claim CENVAT credit. The Tribunal observed that since the extended period of limitation could not be invoked, the recovery of CENVAT credit under Rule 14 of the CENVAT Credit Rules read with Section 73(1) of the Finance Act was not sustainable.

3. Imposition of Interest and Penalty:
The Commissioner had imposed a penalty of ?2,44,48,095/- under Section 78 of the Finance Act and a penalty of ?10,000/- under Section 77(2) of the Finance Act for failing to file ST-3 returns correctly. The Tribunal noted that since the demand under Section 73(1) could not be sustained, the imposition of penalty and recovery of interest were also not sustainable. The Tribunal emphasized that mere suppression of facts without intent to evade payment of service tax was not sufficient for invoking penalties.

4. Validity of Pre-deposit Made by Utilizing CENVAT Credit:
The Department had filed an application stating that the pre-deposit for filing the appeal should have been made in cash and not by utilizing CENVAT credit. The Tribunal rejected this contention, noting that the Department did not substantiate the objection beyond making a bald statement. Therefore, the appeal could not be dismissed on this ground.

Conclusion:
The Tribunal set aside the impugned order dated 31.03.2017 passed by the Commissioner, which had confirmed the demand for recovery of CENVAT credit along with interest and penalties. The appeal was allowed, and the extended period of limitation under Section 73(1) of the Finance Act was held to be inapplicable in this case. The Tribunal also rejected the Department's contention regarding the validity of the pre-deposit made by utilizing CENVAT credit.

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