2025 (2) TMI 1055 - AT - Service Tax

Liability of M/s Semi Conductor Laboratory a Government of India entity to pay service tax on the Franchisee Services provided to Eon Infotech Ltd for conducting VLSI education and training courses - invocation of extended period of limitation - suppression of facts or not - HELD THAT - The entire demand has been confirmed by invoking the extended period; it is also found that the additional commissioner has observed that the appellant being a part of Ministry of Space under Union of India and as such there could have been no malafide intention to evade payment of tax on the part of their official as none of the employee severally or jointly is benefited by evading the service tax and none has any personal gain. The Ld. Additional commissioner has also observed that the discrepancy has come to the knowledge of the Department during investigation subsequent to Audit of the appellant conducted by the Departmental officers for the period 16.07.2001 to 31.03.2005 on 13/31.12.2005. The Order-in-Original the additional Commissioner has dropped the penalty under Section 76, 77 and 78 by holding that malafide intention cannot be inferred on the part of the appellant which is a government of India undertaking. This finding of the Additional Commissioner has not been challenged by the Department and hence has attained finality; once the said finding has attained finality therefore there is no reason for the Commissioner (Appeals) to come to the conclusion that there is a suppression of fact with intend to evade payment of duty and invokes extended period to confirm the demand. Moreover the entire facts were in the knowledge of the department because a lot of correspondences were exchanged during that time when the audit was conducted therefore alleging suppression of facts with intend to evade duty cannot be alleged against government undertaking. Conclusion - The Department was well-informed about the appellant s activities and there was no basis for alleging evasion of duty against a government entity. The entire demand is barred by limitation - the appeal is allowed only on limitation.

Summary

The appeal before the Appellate Tribunal CESTAT Chandigarh involved the issue of whether M/s Semi Conductor Laboratory, a Government of India entity, was liable to pay service tax on the Franchisee Services provided to Eon Infotech Ltd for conducting VLSI education and training courses named "VEDANT." The Commissioner (Appeals) had rejected the appellant's appeal against the demand for service tax and interest. The key legal questions considered by the Tribunal were the applicability of service tax on the appellant's activities, the invocation of the extended period for recovery, and the imposition of penalties under the Finance Act, 1994.The appellant argued that they were not liable to pay service tax as they were providing vocational technical training, not commercial coaching. They contended that the demand was time-barred as there was no suppression of facts to evade tax, and the Department had been aware of the activities. The appellant also highlighted that penalties had been dropped by the Additional Commissioner, which had not been challenged by the Department.The Tribunal examined the facts and legal arguments presented by both parties. It noted that the Department had conducted audits and correspondences with the appellant, raising concerns about service tax liability. The Additional Commissioner had acknowledged the lack of malafide intention on the part of the appellant, a government undertaking, and dropped the penalties. This decision had not been contested by the Department, indicating finality.Ultimately, the Tribunal held that the demand for service tax was time-barred due to the lack of malafide intention and suppression of facts by the appellant. The Tribunal allowed the appeal solely on the grounds of limitation, without delving into the merits of the case. The decision emphasized that the Department was well-informed about the appellant's activities, and there was no basis for alleging evasion of duty against a government entity.In conclusion, the Tribunal ruled in favor of the appellant, determining that the demand for service tax was barred by limitation. The decision highlighted the importance of considering all facts and legal precedents in determining tax liabilities and penalties, particularly in cases involving government entities.