2017 (10) TMI 28 - AT - Service Tax

Short payment of Service Tax - extended period of limitation - Held that - provisions of Section 73(1) have specifically recorded that the Assistant Commissioner or Dy Commissioner has to come to a conclusion and should have a reason to believe and come to a conclusion after verification of the assessment u/s 71 can issue a show-cause notice for demanding tax by invoking extended period of limitation - the issue is now squarely covered by the judgement of the Hon ble High Court of Allahabad in the case of Naresh Kumar & Co Pvt Ltd 2014 (5) TMI 986 - ALLAHABAD HIGH COURT , where on similar issue it was held that the Deputy Commissioner has illegally invoked the provisions of Section 73(1)(a) of the Act and exercised the power to raise the demand under Section 73(1)(a) of the Act - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order-in-appeal confirming demand on main appellant and penalties on individuals.

Analysis:
The appeals were against order-in-appeal No. 4 & 5/2006 (H-II)ST dated 31.07.2006, concerning service tax liability for July 1997 to June 2001. The main appellant and an individual contested the demand and penalties. The appellant's counsel argued that Sections 70, 71, 72, and 73 of the Finance Act 1994 were crucial. The counsel referred to a High Court decision emphasizing reassessment before concluding. The Assistant Commissioner demanded differential duty based on monthly returns, invoking the extended limitation period. The Tribunal noted that the lower authorities did not address the reassessment of filed returns or the invocation of Section 73 properly. The Tribunal cited the High Court's judgment, emphasizing the necessity of the officer having a reason to believe in cases of escaped assessment.

The Tribunal found that the lower authorities failed to address crucial legal aspects, as highlighted by the appellant's counsel. The High Court's judgment emphasized the requirement of the officer having a reason to believe due to the assessee's failure to disclose material facts. The Deputy Commissioner in this case failed to demonstrate such failure, rendering the demand unsustainable. Consequently, the penalties were also deemed unsustainable. The Tribunal, following the High Court's authoritative pronouncement, set aside the impugned order, finding it not sustainable and allowing the appeal.

In conclusion, the Tribunal found the impugned order unsustainable based on legal inadequacies in invoking Section 73 and lack of necessary ingredients. Citing the High Court's judgment, the Tribunal set aside the order, emphasizing the importance of the officer having a reason to believe in cases of escaped assessment due to the assessee's failure to disclose material facts. The demand and penalties were deemed unsustainable, leading to the allowance of the appeal.