2025 (1) TMI 1441 - AT - Service Tax

Recovery of service tax with interest and penalty - it is alleged that for the period 2011-2012 it had shown less income thereby made short payment of service tax - invocation of extended period of limitation. Invocation of Extended period of limitation - HELD THAT - It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid the Central Excise Officer may within one year from the relevant date serve a notice on the person chargeable with the service tax which has not been levied or paid requiring him to show cause why he should not pay amount specified in the notice. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax by the person chargeable with the service tax the provisions of the said section shall have effect as if for the word one year the word five years has been substituted - the demand for the period from April 2011 to September 2011 is hit by limitation as it is even beyond the period of five years. Whether the extended period of limitation could have been invoked in the facts and circumstances of the case for the period from October 2011 to March 2012? - 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 willful 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 is in this context that the Supreme Court observed that since suppression of facts has been used in the company of strong words such as fraud collusion or wilful default suppression of facts must be deliberate and with an intent to escape payment of duty. The extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of service tax. Conclusion - The service tax demand for the period from April 2011 to September 2011 is beyond the period of five years and the service tax demand from October 2011 to March 2012 could not have been confirmed and the extended period of limitation could not have been invoked. Appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, was justified in the case of the appellant for the alleged short payment of service tax.

2. Whether the demand for service tax for the period from April 2011 to September 2011 was barred by limitation.

3. Whether the appellant had suppressed material facts with the intent to evade the payment of service tax, thereby justifying the invocation of the extended period of limitation for the period from October 2011 to March 2012.

ISSUE-WISE DETAILED ANALYSIS

1. Invocation of Extended Period of Limitation

Relevant Legal Framework and Precedents: The invocation of the extended period of limitation is governed by the proviso to Section 73(1) of the Finance Act, 1994, which allows for a five-year period in cases of fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax. The Supreme Court in cases like Pushpam Pharmaceuticals Co. and Anand Nishikawa Co. Ltd. has clarified that "suppression of facts" must be deliberate and with intent to evade tax.

Court's Interpretation and Reasoning: The Tribunal examined whether the appellant had suppressed facts with intent to evade tax. It considered the appellant's argument that an audit had been conducted, and no objections were raised at that time. The Tribunal found that the mere omission to declare certain income does not constitute willful suppression unless it is deliberate and intended to evade tax.

Key Evidence and Findings: The appellant had undergone an audit for the financial year 2011-12, where records were examined, including the balance sheet and trial balance, which mentioned bus charges receipts. No objections were raised in the audit report dated 16.04.2013.

Application of Law to Facts: The Tribunal applied the legal principles established in precedent cases, emphasizing that suppression must be willful and with intent to evade tax. The Tribunal found no evidence of such intent on the part of the appellant.

Treatment of Competing Arguments: The Tribunal considered the department's argument that the appellant failed to disclose bus charges in the ST-3 Returns. However, it found that the department was aware of these charges during the audit, and the delay in issuing the show cause notice undermined the department's position.

Conclusions: The Tribunal concluded that the extended period of limitation was not justified as there was no willful suppression of facts with intent to evade tax.

2. Limitation for Demand from April 2011 to September 2011

Relevant Legal Framework: Section 73(1) of the Finance Act, 1994, prescribes a one-year limitation period for service tax demands, extendable to five years in cases of fraud or suppression.

Court's Interpretation and Reasoning: The Tribunal noted that the demand for the period from April 2011 to September 2011 was issued beyond the five-year period allowed under the extended limitation.

Key Evidence and Findings: The Tribunal considered the relevant dates for filing returns and the issuance of the show cause notice, confirming that the demand was time-barred.

Application of Law to Facts: The Tribunal applied the statutory limitation period and found the demand for this period to be barred by time.

Conclusions: The Tribunal held that the demand for the period from April 2011 to September 2011 was barred by limitation.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed that for the extended period of limitation to apply, there must be willful suppression of facts with intent to evade tax. Mere omission or failure to declare does not suffice.

Final Determinations on Each Issue: The Tribunal set aside the order of the Commissioner (Appeals), holding that the service tax demand for the period from April 2011 to September 2011 was time-barred and that the extended period of limitation for the period from October 2011 to March 2012 was not applicable due to the absence of willful suppression or intent to evade tax.

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