2016 (9) TMI 1108 - HC - Service Tax

Challenge to the show cause notice - Availment of appeal remedy available to petitioner in terms of Section 86 of the Finance Act, 1994 - petitioner was entitled to file an appeal before CESTAT but did not availed the same only for the reason that the impugned proceedings has been initiated by the second respondent by invoking the extended period of limitation which is not invocable in the petitioner s case - whether there is an allegation of fraud, collusion, mis-statement or suppression of facts or not - Held that - the question of limitation in these matters, especially, in Central Excise and Service Tax matters is not essentially a pure question of law, but a mixed question of fact and law. Therefore, question whether extended period of limitation could be invoked or not is essentially a question of fact. The Appellate remedy provided under the Act before the CESTAT is not only an efficacious, but an effective remedy and the CESTAT is entitled to appreciate and reappreciate the facts and therefore, there is no justification on the part of the petitioner to bye-pass the Appeal remedy, more particularly, on the only ground raised by the petitioner before this Court which is purely a question of fact. Nevertheless, this Court examined the Order-in-Original as to whether any finding has been recorded in this regard. It is not in dispute that the basis of the show-cause notice was set-out in the impugned order that deliberately the petitioner did not disclose the fact of availment of Input Service Credit of exempted service. The record of the proceedings show that the second respondent has discussed the matter pertaining to the transaction done by the assessee and it cannot be disputed by the petitioner that the entire proceedings was on account of the investigation taken up by the SIT of the respondent Department. In the case on hand there is no allegation of fraud or collusion and the case against the petitioner is brought under Clause (c) to (e) in the proviso under Section 73(1), viz., wilful misstatement, suppression of facts, contravention of the provisions with intent to evade payment of service tax. To ascertain as to whether there was wilful mis-statement or suppression of facts or contravention of the provisions of the Act or the Cenvat Credit Rules with intent to evade payment of service tax is essentially and purely a question of fact, which has to be agitated before the Tribunal. Therefore, this is not a case where this Court can straight away interfere by exercising its power under Writ Jurisdiction, since disputed question of facts are to be examined while considering the validity and correctness of the impugned order. Therefore, this Court is of the view that the petitioner should avail the Appeal remedy available under the Act and no grounds have been made by the petitioner to justify their conduct in bypassing the remedy before the CESTAT. - Writ petition dismissed as not maintainable

Issues Involved:
1. Challenge to the order passed by the first respondent confirming the order by the second respondent.
2. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
3. Availment of input credit on non-taxable services.
4. Alleged suppression of facts and wilful misstatement by the petitioner.
5. Justification for bypassing the appellate remedy before the CESTAT.

Detailed Analysis:

1. Challenge to the Order Passed by the First Respondent:
The petitioner challenged the order passed by the first respondent in Order-in-Appeal No.272/2016 (STA-1), dated 28.04.2016, which confirmed the order passed by the second respondent in Order-in-Original No.41/2013, dated 18.11.2013. The petitioner argued that the second respondent did not render any findings on the extended period of limitation invoked in the order-in-original.

2. Invocation of the Extended Period of Limitation:
The petitioner contended that the extended period of limitation was not invocable in their case. They argued that the second respondent did not provide specific and explicit findings on why the extended period was applicable. The court noted that the question of limitation in Central Excise and Service Tax matters is a mixed question of fact and law. It was highlighted that the extended period can be invoked under Section 73(1) of the Finance Act if there is fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with intent to evade payment of service tax.

3. Availment of Input Credit on Non-Taxable Services:
The petitioner, engaged in property development, was accused of availing ineligible input credit on commission paid to an overseas agent under the reverse charge mechanism and distributing the same to their branches. The second respondent alleged that the petitioner availed input credit on non-taxable services and did not disclose this in their ST-3 Returns. The petitioner argued that they had co-operated with the Department and provided all necessary documents, thereby not attracting the proviso to Section 73(1).

4. Alleged Suppression of Facts and Wilful Misstatement:
The second respondent justified the invocation of the extended period by stating that the petitioner deliberately did not disclose the fact of availment of input services credit on exempted services. The court found that the second respondent had rendered factual findings to justify the proposal in the show-cause notice, stating that the petitioner did not disclose the facts with the intention to avail ineligible Cenvat Credit and evade payment of service tax.

5. Justification for Bypassing the Appellate Remedy Before the CESTAT:
The petitioner bypassed the appellate remedy before the CESTAT, arguing that there was no specific finding justifying the invocation of the extended period of limitation. The court held that the appellate remedy before the CESTAT is not only efficacious but also effective, allowing for the appreciation and reappreciation of facts. The court examined the order-in-original and found that reasons had been recorded to justify the action. The court concluded that the petitioner should avail the appellate remedy available under the Act and dismissed the writ petition as not maintainable.

Conclusion:
The court dismissed the writ petition, emphasizing that the petitioner should pursue the appellate remedy before the CESTAT to address the disputed questions of fact and the validity of the impugned order. No costs were imposed, and the connected miscellaneous petitions were closed.

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