2025 (3) TMI 11 - HC - Service Tax

Invocation of extended period of limitation under the First Proviso to Section 73 (1) of the Finance Act 1994 - service tax not levied or paid due to fraud collusion willful misstatement or suppression of facts by the petitioner - HELD THAT - As is evident from the proposition which came to be propounded by the Supreme Court in P B Pharmaceuticals and Larsen Toubro 2007 (5) TMI 1 - SUPREME COURT it was held that once necessary facts had already been brought to the notice of the authorities at different points in time the same would clearly be a circumstance destructive of any allegation of the First Proviso to Section 73 (1) being applicable. The Supreme Court held that once the stand of the assessee was known and formed the subject matter of earlier notices it would be impermissible for the respondents to allege suppression of facts. When those principles are applied to the facts of the present case it becomes apparent that it was wholly impermissible for the respondents to resort to the First Proviso to Section 73 (1) of the Act. As is ex facie apparent from a reading of the above there is no material on the basis of which the allegation of a wilful suppression of facts is sought to be sustained. Regard must be had to the fact that the extended period of limitation cannot be justified by a mere reproduction or incantation of the language of the statute. A wilful suppression of facts and which may have allegedly lead to a failure to pay tax would have to rest on material which constitutes proof of the allegation levelled. Conclusion - The invocation of the extended period of limitation under the First Proviso to Section 73 (1) was unjustified as the facts were already known to the respondents from previous proceedings. The impugned SCN is quashed - petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered was whether the extended period of limitation under the First Proviso to Section 73 (1) of the Finance Act, 1994, could be invoked by the respondents. This depended on whether there was a case of service tax not levied or paid due to fraud, collusion, willful misstatement, or suppression of facts by the petitioner. The secondary issue was whether the services provided by the petitioner fell within the taxable category under Section 65 (105) (n) of the Finance Act, 1994, or were exempt.

ISSUE-WISE DETAILED ANALYSIS

Extended Period of Limitation

- Relevant legal framework and precedents: The First Proviso to Section 73 (1) of the Finance Act, 1994, allows for an extended period of limitation if service tax was not levied or paid due to fraud, collusion, willful misstatement, or suppression of facts. The precedents set by the Supreme Court in P&B Pharmaceuticals (P) Ltd. v. Collector of Central Excise and Larsen & Toubro Ltd. v. Collector of Central Excise were pivotal. These cases established that once the necessary facts are disclosed to authorities, subsequent allegations of suppression cannot be sustained.

- Court's interpretation and reasoning: The Court observed that the impugned SCN was the fifth in a series, with the same subject matter as previous SCNs, which had been adjudicated in favor of the petitioner by the Tribunal. The Court noted that the respondents were aware of the petitioner's position and that the same issue had been previously contested. Therefore, invoking the extended period of limitation was unjustified.

- Key evidence and findings: The SCNs issued were based on the same allegations and facts that had been previously adjudicated. The Tribunal had ruled in favor of the petitioner, confirming that the services in question were not taxable under the Finance Act, 1994.

- Application of law to facts: The Court applied the principles from the Supreme Court cases, determining that the respondents could not claim suppression of facts when the facts were already known from previous proceedings. The Court emphasized that the extended period of limitation requires specific evidence of willful suppression, which was absent in this case.

- Treatment of competing arguments: The petitioner argued that the services were exempt and that the respondents were aware of their position, negating any claim of suppression. The respondents contended that the petitioner had not disclosed certain payments in their ST-3 returns, constituting suppression. The Court found the petitioner's arguments more compelling, given the lack of new evidence from the respondents.

- Conclusions: The Court concluded that the invocation of the extended period of limitation was impermissible, as the necessary facts were already disclosed in previous proceedings, and no new evidence of suppression was presented.

Taxability of Services

- Relevant legal framework and precedents: Section 65 (105) (n) of the Finance Act, 1994, defines taxable services provided by a tour operator. The Tribunal had previously ruled that the services in question did not fall within this definition.

- Court's interpretation and reasoning: The Court referred to the Tribunal's findings, which clarified that the services provided by the petitioner were not taxable as they did not meet the criteria outlined in the Finance Act, 1994.

- Key evidence and findings: The Tribunal's judgment, which was based on a detailed analysis of the services provided, supported the petitioner's claim of exemption.

- Application of law to facts: The Court upheld the Tribunal's interpretation that the services were not taxable, as they did not involve the entirety of performance in India, a criterion for taxability under the Export of Service Rules, 2005.

- Treatment of competing arguments: The petitioner consistently argued that the services were exempt, supported by the Tribunal's ruling. The respondents failed to provide a convincing argument or new evidence to counter this position.

- Conclusions: The Court affirmed the Tribunal's decision that the services were not taxable under the Finance Act, 1994, based on the established legal framework and factual findings.

SIGNIFICANT HOLDINGS

- The Court held that the invocation of the extended period of limitation under the First Proviso to Section 73 (1) was unjustified, as the facts were already known to the respondents from previous proceedings. This aligns with the Supreme Court's rulings in P&B Pharmaceuticals and Larsen & Toubro.

- The Court preserved the Tribunal's ruling that the services provided by the petitioner were not taxable under Section 65 (105) (n) of the Finance Act, 1994, as they did not involve the entirety of performance in India.

- The Court quashed the impugned SCN dated 17 October 2019, allowing the writ petition in favor of the petitioner.