2018 (11) TMI 24 - AT - Service Tax

Extended period of limitation - Section 73 (1) of Central Excise Act - banking and other financial services - suppression of facts - reverse charge mechanism - Held that - From the available records that the appellant had disclosed the fact of obtaining ECB loan in foreign currency in the Balance Sheet prepared during the disputed period. It cannot be said that non-payment of service tax by the appellant, was owing to the reason of fraud, collusion, willful mis-statement, etc., with intent to defraud the Government Revenue. In this case, since the period of dispute is from April 2011 to March 2012 and the show-cause notice was issued on 07.01.2016, the extended period of limitation cannot be invoked for confirmation of the adjudged demand and the same should only be confined to the normal period. The impugned order cannot be sustained on the ground of limitation - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Challenge of the impugned order based on limitation under the proviso to Section 73(1) of the Act.

Analysis:
The appellant, engaged in manufacturing C.I. castings, was audited by the department and found to have not paid service tax on fees related to External Commercial Borrowings (ECB) loan. The appellant argued that it did not receive the disputed services directly, and the banks facilitating the loan should be liable for the service tax. The department initiated proceedings for recovery of service tax, interest, and penalties. The appellant contended that the extended period of limitation should not apply due to conflicting views on levy of service tax on recipients of banking services. The Tribunal agreed with the appellant, noting the genuine belief that the banks were the actual service recipients. Since there were conflicting views within the Tribunal, the extended period of limitation could not be invoked, as non-payment was not due to fraud or willful misstatement. The Tribunal cited relevant judgments to support the appellant's argument and held that the impugned order could not be sustained on the ground of limitation alone.

This judgment highlights the importance of clarity in tax liability and the impact of conflicting views within the Tribunal on the application of the extended period of limitation. The case underscores the need for a genuine belief in tax compliance and the relevance of legal precedents in determining tax liability.