2022 (8) TMI 472 - HC - Service Tax

Extended period of limitation - Payment of service tax on being pointed out - Failure to disclose the value in the ST-3 return - Waiver of penalty levied u/s 78 by section 80 of FA - fraud wilful mis-statement or suppression of facts existed or not - Invocation of extended period of limitation - whether the period from 10.9.2004 to 31.7.2007 is barred by limitation or not - HELD THAT - Section 80 of the Act starts with a non-obstante clause. According to the learned counsel for the appellant even though penalty under section 78 of the Act is waived invoking section 80 of the Act if the assessee proves that there was reasonable cause for the failure of payment of service tax the same yardstick cannot be brought into section 73(1) of the Act. Section 73(1) of the Act gives a right to the Central Excise Officer for the recovery of the service tax due. Exonerating the respondent from the payment of penalty under Section 78 of the Act by invoking Section 80 of the Act will not absolve the Bank from payment of service tax and recovery of the avoided service tax by the extended period of limitation under section 73 of the Act. The facts in the present case show that on issuance of the summons on 21/11/2007 the Chief Financial Officer appeared and gave his statement that the non payment of service tax on full value received by the branches was not intentional but due to system failure and they immediately upon receipt of difference on the short payment remitted the entire differential amount of service tax due to the government inclusive of interest. So they indirectly admit that service tax is due to the appellant from the respondent bank. The non payment of service tax was noted by the department only through the Intelligence report and when non-payment was informed to the respondent bank only they paid the service tax due along with the interest. The assessee has not disclosed the value of taxable service for the period 10.9.2004 to 31.7.2007 in their ST 3 Returns filed to the department. Only when the department issued a show cause notice the responded bank remitted the amount of tax. Hence merely because they were exonerated under Section 80 of the Act from payment of penalty for reasonable cause for non payment the same yardstick cannot be taken by the bank to contend that the extended period of limitation as prescribed under proviso to section 73 of the Act is available. In this case having taken centralised registration on 1.4.2007 the respondent failed to remit the service tax. Thus it can be seen that there was non-payment of service tax from 1.4.2007 and it can be brought under clause (d) of section 73 of the Act which is suppression of fact. Hence the invocation of extended period of limitation by the department can only be sustained. The Tribunal went wrong in holding that since the penalty under section 78 of the Act is waived there was no intention to evade payment of tax on the part of the appellant and thus the extended period of limitation available under section 73 of the Act is not available to the department and the entire period from 10.9.2004 to 31.7.2007 was held to be barred by limitation. The findings of the Tribunal regarding the extended period of limitation is wrong and the same is set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Justification of the Appellate Tribunal's decision to set aside the order without limiting it to the claims raised by the respondent.
2. Justification of the Appellate Tribunal's conclusion that the extended period of limitation cannot be invoked.
3. Allegation of suppression of information by the respondent in their statutory returns.

Issue-wise Detailed Analysis:

1. Justification of the Appellate Tribunal's Decision:
The Tribunal relied on various judgments and concluded that the services in question fell under the definition of 'Import of Service,' making them liable for service tax on a reverse charge basis from 18.4.2006. The Tribunal also noted that the Commissioner had admitted that the short payment of service tax was not deliberate but due to system failure. Consequently, the Tribunal held that the extended period of limitation could not be invoked and set aside the impugned order, allowing the appeal with consequential relief.

2. Extended Period of Limitation:
The appellant argued that the Tribunal erred in finding that the extended period of limitation could not be invoked. Section 73 of the Finance Act 1994 allows for an extended period of five years if the non-payment of service tax is due to fraud, collusion, wilful misstatement, or suppression of facts. The Tribunal found that since the Commissioner had waived the penalty under Section 78 by invoking Section 80, there was no intention to evade payment of service tax, making the extended period of limitation inapplicable. However, the High Court disagreed, noting that the non-payment was detected through an Intelligence report and not disclosed in the respondent's ST-3 Returns. Therefore, the invocation of the extended period of limitation was justified.

3. Allegation of Suppression of Information:
The appellant contended that the short payment was detected by the department and there was clear suppression of information by the respondent. The High Court noted that the respondent admitted to non-payment due to system failure and paid the service tax only after the department's intervention. The High Court found that the respondent's failure to disclose the value of taxable services in their ST-3 Returns constituted suppression of facts, justifying the invocation of the extended period of limitation.

Conclusion:
The High Court allowed the appeal, setting aside the Tribunal's findings regarding the extended period of limitation. The Court held that the extended period of limitation was applicable due to the respondent's suppression of facts and non-disclosure in their statutory returns. The Tribunal's decision to waive the penalty under Section 80 did not absolve the respondent from the extended period of limitation under Section 73.