2022 (6) TMI 860 - AT - Service Tax

Invocation of extended period of limitation - Non-payment of service tax on several items of work - business auxiliary service - whether the Department was justified in invoking the extended period of limitation of five years, because admittedly the show cause notice was issued on October 24, 2009 for the period 2004-2005 to 2007-2008? - HELD THAT - In the present case, the show cause notice merely mentions that the appellant suppressed the value of taxable service. The show cause notice does not mention that suppression was with an intention to evade payment of service tax. The submission of learned authorized representative appearing for the Department that the show cause notice also mentions that suppression was with an intent to evade payment of service tax cannot be accepted because the said allegation is in regard to levy of penalty under sections 76 and 78 of the Finance Act and not section 73(1) of the Finance Act. The Commissioner, however, observed that the appellant had evaded payment of service tax by suppressing the correct value on taxable service. The finding has not only been recorded without giving reasons, but even otherwise the order cannot go beyond the show cause notice. In COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD 2007 (8) TMI 10 - SUPREME COURT , the Supreme Court observed that it was well settled that a show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if there was no invocation of Rule 7 of the Valuation Rules, 1975 in the show causes notice, it would not be open to the Commissioner to invoke the said Rule - In NESTOR PHARMACEUTICALS LTD. VERSUS COMMISSIONER OF C. EX. DELHI 2000 (1) TMI 187 - CEGAT, NEW DELHI a Division Bench of the Tribunal observed that the Commissioner (Appeals) cannot go beyond the scope of the show cause notice and that no matter can be decided on a ground other than the grounds raised in the show cause notice and for this reason the impugned order was set aside. It, therefore, follows that the Commissioner was not justified in holding that the extended period of limitation under the proviso to section 73(1) of the Finance Act was correctly invoked - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
2. Allegation of suppression of facts with intent to evade payment of service tax.
3. Justification for the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Invocation of the Extended Period of Limitation:
The primary issue was whether the Department was justified in invoking the extended period of limitation of five years under Section 73(1) of the Finance Act, 1994. The show cause notice was issued on October 24, 2009, for the period 2004-2005 to 2007-2008. According to Section 73(1), the Central Excise Officer may serve a notice within one year from the relevant date unless the non-payment of service tax was due to fraud, collusion, wilful misstatement, or suppression of facts with intent to evade payment, in which case the period extends to five years.

2. Allegation of Suppression of Facts with Intent to Evade Payment of Service Tax:
The show cause notice alleged that the appellant suppressed the value of taxable service, but it did not explicitly state that this suppression was with the intent to evade payment of service tax. The Commissioner confirmed the extended period of limitation by stating that the appellant evaded payment of service tax by suppressing the correct value of taxable service. However, the Tribunal noted that suppression of facts must be deliberate and with intent to evade payment, as established by the Supreme Court in cases like Pushpam Pharmaceuticals Co. vs. Commissioner of Central Excise, Bombay, and Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise. The Tribunal emphasized that mere omission does not constitute suppression unless it is deliberate with an intention to evade tax.

3. Justification for the Imposition of Penalties under Sections 76 and 78:
The show cause notice mentioned that the appellant failed to pay service tax with the intent to evade payment, thus liable for penalties under Sections 76 and 78. However, the Tribunal found that the Commissioner's order went beyond the show cause notice, as the allegation of intent to evade was related to penalties and not the invocation of the extended period under Section 73(1). The Tribunal cited precedents that a show cause notice is the foundation for levy and recovery, and the Commissioner cannot go beyond its scope.

Conclusion:
The Tribunal concluded that the Commissioner was not justified in invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994, as the show cause notice did not establish that the suppression was with intent to evade payment of service tax. Consequently, the order dated 03.08.2017 passed by the Commissioner was set aside, and the appeal was allowed.