2023 (2) TMI 730 - AT - Service Tax

Extended period of limitation - SCN issued beyond normal period - Section 73 of the Finance Act 1994 - wilful misstatements of facts or not - short payment of service tax - Business Support Service - HELD THAT - The recovery of short-levied or non-levied or short-paid service tax amount within the normal period is the rule in the eventuality of short-levy or short-payment of tax amount by the assessee. In other words whatever may be the reason if the service tax amount has not been paid by the assesse the department is free to initiate proceedings under the main part of sub-section (1) of Section 73 ibid to recover of the service tax amount which have been short-levied or non-levied etc. On the contrary invocation of the proviso clause contained in Sub-Section (1) of Section 73 ibid is the exception which can be sparingly invoked only in the eventuality of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter V of the Finance Act 1994 or rules made there under with intent to evade payment of the service tax. In such eventuality instead of the period of one year the show cause notice can be issued by invoking the extended period of limitation within the period of five years from the relevant date. In this case it is an admitted fact on record that based on the books of accounts maintained by the appellant the officers of service tax department had conducted the audit and they have not disputed the authenticity or accuracy of records maintained by the appellant. Further it is also an admitted fact on record that towards provision of the taxable service the appellant had received lesser amount than that as shown in the invoices issued to the service recipient. Since towards provision of the taxable service the appellant had received the lesser amount after adjustment of the aforementioned deductions their tax liability is confined only to the amount which was actually received for provision of the taxable service. Thus under such circumstances the charges of suppression etc. cannot be levelled against the appellant. There are no merits in the impugned order insofar as it has confirmed the service tax demand for extended period beyond one year along with the interest and penalty under Section 77 ibid on the appellant - appeal allowed.

Summary

Issues:
1. Time limitation for issuance of show cause notice under Section 73 of the Finance Act, 1994.
2. Applicability of extended period of limitation for recovery of service tax.
3. Assessment of penalty under Section 78 of the Finance Act, 1994.
4. Interpretation of provisions for recovery of short-levied or non-levied service tax.

Issue 1: Time Limitation for Show Cause Notice
The appellant argued that the show cause notice issued by the Department in September 2012, for a disputed period from 2008 to March 2011, was time-barred under Section 73 of the Finance Act, 1994. The appellant contended that since there was no fraud, collusion, or suppression of facts, the notice should have been issued within one year from the relevant date. The appellant relied on the impugned order, which dropped the penalty imposed under Section 78 of the Act, indicating that the extended period of limitation was wrongly invoked.

Issue 2: Applicability of Extended Period
The Revenue contended that in the era of self-assessment, the extended period of limitation was justifiable due to the appellant's failure to notify the non-payment of service tax to the department. The Revenue argued that since the discrepancy was discovered by the department and not voluntarily disclosed by the appellant, the extended period for confirming the demands was warranted.

Issue 3: Assessment of Penalty
The impugned order modified the original order by setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The appellant argued that since the provisions related to fraud, collusion, or wilful misstatement were not invoked in the impugned order, the period of limitation for issuing the show cause notice should have been confined to one year from the relevant date.

Issue 4: Interpretation of Recovery Provisions
The Tribunal analyzed Section 73 of the Finance Act, 1994, which deals with the recovery of short-levied or non-levied service tax. It noted that the recovery within the normal one-year period is the rule, while the proviso clause, allowing the extended period of five years, is an exception applicable in cases of fraud, collusion, or suppression of facts to evade tax payment. The Tribunal found that the appellant had received a lesser amount than indicated in the invoices, leading to a confined tax liability based on the actual received amount. As no suppression was evident, the extended period of limitation was deemed inapplicable for recovery beyond the normal one-year period.

In conclusion, the Tribunal allowed the appeal in favor of the appellant, setting aside the confirmed service tax demand for the extended period and associated interest and penalty under Section 77 of the Finance Act, 1994.