2023 (8) TMI 257 - HC - Service Tax

Time limit for service of notice - Applicability of Section-73(4), Chapter-V of the Finance Act, 1994 - whether decision of the Commissioner of Income Tax (CIT), affirmed by the CESTAT is sustainable as it held section 73 (4) in chapter V of Finance Act 1994 to be applicable? - HELD THAT - Sub-section (1) of section 73 provides, the authority may within 18 months from the relevant date serve notice on the person chargeable with service tax, which has not, inter alia, been paid. The proviso gives reasons that may extend the period to 5 years for notice under it being issued. The finding on fact is no notice was issued to petitioner (assessee) under sub-section (1) of section 73. However, sub-section (4) in section 73 includes reason of contravention of any of the provisions in the chapter. Regarding this, demand-cum-show cause notice dated 17th November, 2009 stood issued on petitioner, invoking the proviso to sub-section (1) in section 73. In the circumstances, by operation of sub-section (4) in section 73, provision in sub-section (3) of said section became inapplicable to petitioner. This is more so because under sub-section (1) of section 78, the requirement is for the person fixed with the liability of penalty to be that he has been served notice under proviso to sub-section (1) of section 73. The show cause notice dated 17th November, 2009 is such notice. Sub-section (1) in section 73 provides for issuance of two separate notices for distinct purposes. The first is the notice under sub-section (1), which cannot be issued on prior payment of tax and the other, under the proviso. The question in the affirmative and in favour of revenue - Appeal dismissed.

Summary

Issues involved:
The appeal against the decision of the Customs, Excise Service Tax Appellate Tribunal (CESTAT) raises the issue of the applicability of Section-73(4), Chapter-V of the Finance Act, 1994 to the case of the appellant.

Comprehensive details of the judgment:

Issue 1: Applicability of Section-73(4), Chapter-V of the Finance Act, 1994
The appellant argued that they were covered by sub-section (3) in section 77 and section 80 of the Finance Act, 1994, due to a Central Board of Excise and Customs (CBEC) circular. The Tribunal noted that the appellant had paid the duty plus interest before the issuance of the show-cause notice, indicating compliance with the law.

Issue 2: Liability for evasion of service tax
The respondent contended that the appellant had consciously collected the tax but failed to register and pay it, leading to evasion. The Tribunal found that the appellant had evaded payment by not registering as required by law, and upheld the penalty order based on subsections (3) and (4) of section 73 of the Finance Act, 1994.

Issue 3: Interpretation of relevant provisions
The Court examined subsections (1), (3), and (4) of section 73 along with subsection (1) of section 78. Subsection (1) of section 73 allows for serving notice on the person chargeable with service tax within a specified period, while subsection (3) restricts the issuance of a notice if the tax has been paid before receiving information. Subsection (4) of section 73 negates the application of subsection (3) under certain conditions, with section 78 mandating penalties for tax evasion.

Conclusion:
The Court found that the appellant had not been issued a notice under subsection (1) of section 73, but a demand-cum-show cause notice was issued invoking the proviso to subsection (1). As per subsection (4) of section 73, the provisions of subsection (3) were deemed inapplicable to the appellant. Therefore, the Court upheld the decision of the CESTAT and CIT, confirming the liability for penalty and dismissing the appeal in favor of the revenue.