2022 (8) TMI 1103 - AT - Service Tax

Maintainability of appeal - time limitation - whether the show cause notice has been rightly issued invoking the extended period of limitation? - HELD THAT - The show cause notice has been issued in a mechanical way without referring to the records by the Department. When the show cause notice was issued in the year 2019 the ST returns which were filed in November 14 and July 15 were available on the record of the Revenue. But it is alleged in the show cause notice that appellant have failed to file the returns - the appellant had filed reply to show cause notice along with copy of the ST- 3 returns. There is total failure on the part of the assessing officer to consider the reply filed as well as the documents annexed therewith being the copy of ST 3 returns - in spite of the assessee being a registered assessee the Assessing Officer has failed to look into the records and refer to the copy of returns already filed. The extended period of limitation is not invokable as there is no failure on the part of the appellant to discloses taxable turnover and depositing the admitted taxes - it is observed that there is likely to be some difference in the turnover as per the ST 3 returns as the same is on accrual basis as compared to the turnover reflected in the Form-26 AS. (as per income tax records) because this is as per receipt basis. The appellant are directed to file reconciliation statement before the Adjudicating Authority reconciling the turnover as per the ST 3 return and as per Form 26 A.S. for the purpose of appraisal. If any tax is found payable by the appellant they shall deposit the same as per Rules - appeal allowed.

Summary

Issues:
1. Whether the show cause notice invoking the extended period of limitation was rightly issued.

Analysis:
The appeal revolved around the correctness of the show cause notice issued to the appellant invoking the extended period of limitation. The appellant, engaged in various services, had filed their service tax returns and paid the admitted taxes for the financial year 2014-2015. The show cause notice alleged non-disclosure of tax liability based on information from the Income Tax Department. The appellant contested the notice, arguing that they had filed the service tax returns and urged that the extended period of limitation was not applicable. However, the Adjudicating Authority failed to consider the appellant's reply and the filed returns, leading to an ex parte confirmation of demand, penalties, and interest by the Deputy Commissioner.

The Deputy Commissioner's order was challenged before the Commissioner (Appeals), who dismissed the appeal due to non-compliance with the pre-deposit requirement under Section 35F of the Act. The appellant, through their counsel, highlighted the error in the appeal memo regarding the tax, penalty, or interest deposited, stating that they had indeed deposited taxes as per the ST-3 returns. The counsel argued that the dismissal of the appeal was incorrect, emphasizing that the appellant had complied with the statutory deposit requirement.

Upon reviewing the contentions, the Member (Judicial) found that the show cause notice was issued mechanically without referencing available records. Despite the appellant filing a reply with the ST-3 returns, the assessing officer failed to consider these documents. The Member noted that the appellant had not failed to disclose taxable turnover or pay admitted taxes, and there might be differences between turnover in ST-3 returns and Form-26 AS due to accrual vs. receipt basis. Consequently, the extended period of limitation was deemed inapplicable, and the appeal was allowed, setting aside the impugned order. The Commissioner (Appeals)' dismissal was also criticized as the appellant had deposited substantial tax exceeding the statutory requirement.

The appellant was directed to submit a reconciliation statement reconciling turnover from ST-3 returns and Form 26 AS for appraisal purposes, with any additional tax found payable to be deposited accordingly. Ultimately, the appeal was allowed, and the impugned order was overturned.