2022 (10) TMI 1079 - AT - Service Tax

Extended period of limitation - Business Auxiliary Services - providing various services including that of Consultants - negative list of Section 66B of Service Tax Act (Finance Act, 2012) - HELD THAT - Section 73(1) of the Finance Act, 1994 deals with the recovery of service tax not levied or not paid or short levied or short paid or erroneously refunded. According to which the recovery may be called for by the Central Excise Officer within the period of 30 months. However, the demand could be raised for a period beyond the said period of 30 months to the maximum of 5 years. But for the reason of fraud or collusion or any willful mis- statement or suppression of facts or contravention of any of the provisions of this act or of the rules made there under with intent to evade payment of duty - Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 73(1) of the Finance Act, 1994 the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of any incorrect statement with the knowledge that the statement was not correct. Though the proviso to Section 73(1) of the Finance Act, 1994 carves out an exception and permits the authority to exercise their power recovery within 5 years from the relevant date in the circumstances in the proviso, one of it being suppression of facts - mensrea/the intent to evade the tax liability is the core for invoking the extended period over the normal period. Appellants apparently have mentioned themselves to be under the bona fide belief of still not being liable under service tax. Based on the said belief only they neither had applied the registration nor had ever filed the service tax return. The reason for such bona fide belief stands corroborated from the fact that the service tax was neither collected by them from M/s. ACCSL nor accordingly, was paid by the appellant. There is no denial to the fact that appellants have not charged service tax from M/s. ACCSL. There is also no denial to the fact that the entire amount of commission was shown by the appellants in their income tax returns and the tax liability under direct taxes was duly discharged by the appellants. These perusals and undisputed facts are sufficient to hold that there was no mala fide intent on the part of the appellants to evade the payment of service tax. They rather were under bona fide belief. Since there was the scope and belief with the appellants for entertaining the doubt about no liability of theirs to pay the service tax that the application of Section 73(1) of the Finance Act, 1994 the proviso thereof gets ruled out and resultantly, the extended period of limitation is held to have wrongly invoked by the department. The adjudicating authorities below are held to have wrongly confirmed the demand for the extended period of limitation - Appeal allowed.

Issues Involved:
1. Whether the appellants were liable to pay service tax on the commission received from M/s. Adarsh Credit Cooperative Society Ltd. (ACCSL) for providing 'Business Auxiliary Services'.
2. Whether the invocation of the extended period of limitation for issuing show cause notices was justified.
3. Whether the appellants had a bona fide belief that they were not liable to pay service tax.
4. Whether the appellants were entitled to the benefit of cum-tax.

Issue-wise Detailed Analysis:

1. Liability to Pay Service Tax:
The appellants were receiving commission from M/s. ACCSL for providing various services, including those of 'Consultants'. The Department observed that the appellants had not discharged their service tax liability on the commission received since the services became taxable post 01.07.2012. The show cause notices were issued for the recovery of service tax along with interest and penalties. The adjudicating authorities confirmed the demands except for some benefit of exemption for a particular period. The Tribunal acknowledged that the services in question were taxable based on the Larger Bench decision in the case of M/s. Pagariya Auto Center Vs. Commissioner of C.Ex., Aurangabad, which held that the provider of 'Business Auxiliary Services' is liable to pay the duty.

2. Invocation of Extended Period of Limitation:
The show cause notices were issued invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994, which allows recovery beyond the normal period of 30 months up to 5 years in cases of fraud, collusion, willful misstatement, or suppression of facts with intent to evade payment of duty. The Tribunal referred to the Hon'ble Supreme Court's decisions in Continental Foundation Jt. Venture Vs. Commr. Of C. Ex. Chandigarh-I and Pushpam Pharmaceuticals Company Vs. Collector of C.Ex., Bombay, which clarified that mere omission to give correct information is not suppression of facts unless it was deliberate to evade duty. The Tribunal concluded that the burden is on the Revenue to prove suppression of fact, and an incorrect statement cannot be equated with a willful misstatement.

3. Bona Fide Belief:
The appellants argued that there was confusion about the taxability of the services provided, and they were under the bona fide belief that service tax was not applicable. They cited the example of LIC agents who were also not paying service tax on commissions received. The Tribunal found that the appellants had not charged service tax from M/s. ACCSL and had disclosed the entire commission in their income tax returns. This indicated a bona fide belief rather than an intent to evade tax. The Tribunal referred to the case of Omega Financial Services Vs. Commissioner of C. Ex., Cochin, where it was held that a bona fide belief can be a reasonable cause for failure to discharge tax liability, and penalties should not be imposed in such cases.

4. Cum-Tax Benefit:
The appellants also prayed for the cum-tax benefit to be extended to them. The Tribunal did not explicitly address this issue in the judgment, but the setting aside of demands for the extended period implicitly suggests that any recalculations for the normal period would consider the applicable benefits, including cum-tax.

Conclusion:
The Tribunal held that the extended period of limitation was wrongly invoked by the department as there was no mala fide intent on the part of the appellants to evade payment of service tax. The orders confirming the demand for the extended period were set aside. However, any demand for the normal period in the respective appeals was confirmed. The appeals were allowed with respect to demands pertaining to the extended period of the respective show cause notices.

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