2023 (4) TMI 169 - AT - Service Tax

Invocation of extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act 1994 - suppression of facts or not - case of Department is that the appellant was providing works contract service but had not paid service tax as a result of which the premises of the appellant was visited on 26.03.2015 by the Officers - HELD THAT - It is apparent that even on 05.04.2012 the Department was aware of the nature of the activities carried out by the appellant and, therefore, for the period from October 10 to June 12 there was no reason for the Department to wait till 16.03.2016 to issue show cause notice. The show cause notice could have been issued immediately after the returns were filed by the appellant for the period 2010 to 2012. In such circumstances the Department could not have taken shelter of the third party information, as it was possessed of all the information necessary for the said period. The Commissioner completely failed to appreciate this position and held that the invocation of the extended period of limitation was justified because the appellant had suppressed information in the service tax returns. The invocation of the extended period of limitation cannot be sustained and needs to be set aside and is set aside. As the entire demand is for the extended period of limitation, it would not be necessary to examine the issue on merits. Appeal allowed.

Issues Involved:
1. Demand of service tax under the extended period of limitation.
2. Classification of services provided by the appellant.
3. Allegation of willful suppression of facts by the appellant.
4. Applicability of extended period of limitation under section 73(1) of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Demand of service tax under the extended period of limitation:
The appellant was issued a show cause notice on 16.03.2016 for non-payment of service tax for the period from 01.10.2010 to 30.06.2012. The Department invoked the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994, alleging willful suppression of material facts by the appellant with the intent to evade payment of service tax. The Commissioner confirmed the demand of service tax amounting to Rs. 2,29,18,498/- along with applicable interest and penalties under sections 77 and 78 of the Finance Act, 1994.

2. Classification of services provided by the appellant:
The appellant contended that it constructed single independent residential units and thus did not fall under the definition of 'new residential complex' as defined under section 65(91)(a) of the Finance Act. The Department, however, argued that the appellant was providing 'Works Contract Service' and was liable to pay service tax. The Commissioner held that the appellant's services fell under 'Works Contract Service' and confirmed the demand.

3. Allegation of willful suppression of facts by the appellant:
The show cause notice alleged that the appellant had willfully suppressed material facts by not declaring the value of services provided in their ST-3 returns and not paying the service tax. The Commissioner found that the appellant had deliberately suppressed information and failed to pay service tax, thereby justifying the invocation of the extended period of limitation. The appellant, however, argued that there was no suppression of facts as it believed it was not liable to pay service tax.

4. Applicability of extended period of limitation under section 73(1) of the Finance Act, 1994:
The appellant argued that the extended period of limitation could not be invoked as the Department was already aware of the nature of the appellant's activities from an earlier show cause notice dated 05.04.2011 for the period from 01.04.2007 to 30.09.2010. The Department's argument that the information was received from a third party and the inspection was carried out in 2015 was not accepted by the Tribunal. The Tribunal held that the Department was already aware of the appellant's activities and there was no reason to wait until 16.03.2016 to issue the show cause notice for the subsequent period. Therefore, the invocation of the extended period of limitation was not justified.

Conclusion:
The Tribunal set aside the invocation of the extended period of limitation and the entire demand of service tax. Since the demand was for the extended period, the Tribunal did not examine the issue on merits. The impugned order dated 24.01.2017 passed by the Commissioner was set aside, and the appeal was allowed.

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