2024 (4) TMI 790 - HC - Service Tax

Invocation of Extended period of Limitation - Evasion of service tax - taxability - construction of complex service - failure to file proper ST-3 returns - suppression of material facts - Section 78 of the Finance Act, 1994 - HELD THAT - Applying provisions of Section 73, to the facts of the present case, it is clear that there was no intention on the part of the Respondent to evade payment of service tax. By evasion, it would be meant that the assessee was eluding and avoiding to pay tax by trickery. The intention of the Respondent in the present case was not to escape or to have an intention to default in payment of taxes so as to defeat the rigorous of the taxing provisions. The basic premise in regard to the applicability of the different ingredients namely fraud, collusion, wilful mis-statement, suppression of facts or contravention of any of the provisions of the said Chapter or of the rules made thereunder, with intent to evade payment of service tax. It would be appropriate to note the jurisprudential understanding of the concept of evasion. In Tamilnadu Housing Board v/s. Collector of Central Excise, Madras and Another 1994 (9) TMI 69 - SUPREME COURT the Supreme Court has held that the word evade in the context of the Central Excise law would mean defeating the provisions of law of paying duty. Thus, evasion is one of the basic requirements for applicability of the extended period under the proviso to sub-section (1) and also in regard to applicability of sub-section (4) of Section 73 of the Finance Act, 1994. It is not in doubt that Respondent, much prior to the issuance of the show cause notice, paid the service tax as also the interest thereon. If this be the case, certainly, the designated officer was not correct in issuing a show cause notice to pass the Order-in-Original. It has been rightly interfered by the Tribunal observing that the department was not justified in invoking the extended period in the present case, and, more particularly, when the entire service tax as also the interest was paid prior to the issuance of the show cause notice, clearly indicating that there was no intention of the Respondent to evade payment of service tax. There are no merit in the Appeal - appeal dismissed.

Summary

Issues Involved:
1. Intention to evade service tax.
2. Invocation of extended period of limitation for issuing Show Cause Notice.
3. Applicability of sub-section (3) of Section 73 of the Finance Act, 1994.
4. Setting aside penalties under Sections 77 and 78 of the Finance Act, 1994.
5. Consistency with the decision in Master Marine Services P. Limited.

Summary:

1. Intention to Evade Service Tax:
The Tribunal held that the Respondent had paid the entire service tax and interest before the issuance of the show cause notice, indicating no intention to evade service tax. The Court agreed, finding no substantial question of law on this issue.

2. Invocation of Extended Period of Limitation:
The Tribunal found that invoking the extended period under the proviso to sub-section (1) of Section 73 of the Finance Act, 1994 was inappropriate as the Respondent had paid the service tax before the issuance of the show cause notice. The Court upheld this view, noting that there was no intention to evade payment of service tax.

3. Applicability of Sub-section (3) of Section 73:
The Tribunal applied sub-section (3) of Section 73, which states that if the service tax is paid before the issuance of the show cause notice, the Department cannot issue such a notice. The Court agreed, emphasizing that the Respondent's payment of tax and interest before the notice precluded the need for further action.

4. Setting Aside Penalties:
The Tribunal set aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, as the Respondent had complied with the tax payment before the show cause notice. The Court found no error in this decision.

5. Consistency with Master Marine Services P. Limited:
The Tribunal did not follow its previous decision in Master Marine Services P. Limited, considering the specific facts of the current case. The Court supported this discretion, finding no inconsistency warranting intervention.

Conclusion:
The Court dismissed the Revenue's appeal, agreeing with the Tribunal's findings that the Respondent had no intention to evade service tax and had paid the dues before the issuance of the show cause notice, thus nullifying the need for extended period invocation and penalties. The Court also directed the Department to process the Respondent's refund application expeditiously.