2023 (7) TMI 199 - AT - Service Tax

Extended period of limitation - wilful suppression of facts or not - whether the Commissioner was justified in holding that the extended period of limitation contemplated under section 73(1) of the Finance Act was correctly invoked in the facts and circumstances of the case? - HELD THAT - It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be wilful since wilful precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression wilful before suppression of facts under section 73(1) of the Finance Act, suppression of facts has still to be wilful and with an intent to evade payment of service tax - The Supreme Court and the Delhi High Court have held that suppression of facts has to be wilful and there should also be an intent to evade payment of service tax. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It would also be useful to refer to a decision of the 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. Various factors have not been examined by the Commissioner in the impugned order and a conclusion has merely been drawn that because there was suppression of facts by the appellant, the suppression was with an intent to evade payment of service tax - impugned order holding that the extended period of limitation has been correctly invoked, therefore, cannot be sustained and is set aside - appeal allowed.

Summary

Issues Involved:

1. Taxability under Business Auxiliary Services (BAS)
2. Invocation of Extended Period of Limitation

Summary:

Taxability under Business Auxiliary Services (BAS):

The appellant, engaged in manufacturing, brewing, and bottling of alcoholic beverages, entered into an Agreement with UBL for manufacturing beer of UBL's brands. A show cause notice was issued alleging that the transaction is taxable under BAS as defined under section 65(19) and made taxable under section 65(105)(zzb) of the Finance Act, 1994. The appellant argued that the operations were pure manufacturing and not "for, or on behalf" of UBL, thus not subject to service tax under BAS. The Commissioner, however, confirmed the demand of service tax with interest and penalty, holding that the appellant did not have ownership of the goods and the proceeds were controlled by UBL.

Invocation of Extended Period of Limitation:

The primary issue examined was whether the extended period of limitation could be invoked. The show cause notice alleged that the appellant contravened provisions by reason of fraud, suppression of facts, and willful misstatement with intent to evade payment of service tax. The appellant contended that there was a bona fide belief that service tax was not payable as they were engaged in manufacturing. The Commissioner found that the appellant distorted facts with mala-fide intention to evade payment of service tax.

The Tribunal noted that the entire period involved falls under the extended period of limitation and examined whether the necessary ingredients for invoking the extended period, namely willful suppression of facts with intent to evade payment of service tax, were present. Citing various Supreme Court and High Court judgments, it was emphasized that suppression of facts must be deliberate and with intent to evade payment of duty. The Tribunal concluded that the factors indicating willful suppression and intent to evade payment were not examined properly by the Commissioner.

Conclusion:

The Tribunal set aside the impugned order, holding that the extended period of limitation was not correctly invoked. Consequently, the demand of service tax for the extended period was not sustainable. The appeal was allowed, and the order dated 21.08.2018 was set aside.

(Order pronounced on 03.07.2023)