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2024 (12) TMI 356 - HC - Service TaxFailure of the appellant to pay tax in respect of certain taxable events in the returns filed by the appellant - Invocation of extended period of limitation in terms of proviso to Section 73 of the Finance Act, 1994 when none of the ingredients stipulated therein have been satisfied - short-payment or short-expungement in statutory returns - malafide intent to evade payment of tax - malafide intent of appellant - penalty u/s 78 of the Finance Act, 1994 and Rule 15 (3) of the Credit Rules - benefit of Section 80 of the Finance Act, 1994 denied. HELD THAT - The decision of the Hon'ble Supreme Court in Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay 1995 (3) TMI 100 - SUPREME COURT , while dealing with Section 11 A of the Central Excise Act, 1944, the Court held ' A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.' It is found that, barring a bald reference in the show cause notice bearing No.LTUC/279/2014-ADC dated 05.08.2014 that the appellant's conduct attracted the proviso to Section 73 of the Finance Act, 1994, there was no other material to come to conclusion that there was willful suppression of the fact by the appellant. The question of imposition of penalty under Section 78 of the Finance Act, 1994 and under Rule 15 (3) of the CENVAT Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 will arise only when there is deliberate attempt on the part of the person to mislead the department to evade payment of tax. In this case, the show cause notice not to have issued to the appellant in view of sub Section 3 of Section 73 of the Finance Act, 1994. The case of the petitioner was not governed by proviso to Section 73 or sub- Section 4 of Section 73 of the Finance Act, 1994. Under these circumstances, the substantial questions of law are answered in favour of the appellant and against the Respondent Department. The reference in the impugned order passed by the Appellate Tribunal is liable to be set aside. Appeal allowed.
Issues:
- Invocation of extended period of limitation under proviso to Section 73 of the Finance Act, 1994 - Malafide intent in cases of short-payment or short-expungement in statutory returns - Imposition of penalty under Section 78 of the Finance Act, 1994 without finding of suppression - Benefit of Section 80 of the Finance Act, 1994 for short-payment of service tax Analysis: Issue 1: Invocation of extended period of limitation The appellant challenged the invocation of the extended period of limitation under the proviso to Section 73 of the Finance Act, 1994. The Tribunal upheld the invocation based on discrepancies in the audit records and returns, without the appellant providing a satisfactory explanation. The appellant argued that the discrepancies were due to genuine clerical errors, not malafide intent. The Court found that there was no evidence of willful suppression by the appellant, which is necessary for invoking the extended period of limitation. Issue 2: Malafide intent in cases of short-payment or short-expungement The Tribunal concluded that every instance of short-payment or short-expungement in statutory returns indicates malafide intent to evade tax. However, the appellant contended that the discrepancies were due to genuine clerical errors and not deliberate attempts to evade tax. The Court agreed with the appellant, emphasizing that there was no positive finding of suppression, which is crucial for establishing malafide intent. Issue 3: Imposition of penalty without finding of suppression The Tribunal imposed a penalty under Section 78 of the Finance Act, 1994 and Rule 15(3) of the Credit Rules without a positive finding of suppression by the appellant. The Court held that penalties should only be imposed when there is a deliberate attempt to mislead the department to evade tax. Since there was no evidence of willful suppression, the Court ruled in favor of the appellant and set aside the penalties. Issue 4: Benefit of Section 80 for short-payment of service tax The appellant sought the benefit of Section 80 of the Finance Act, 1994, claiming a reasonable cause for the short-payment of service tax. The Tribunal did not extend this benefit to the appellant, despite the genuine clerical errors cited by the appellant. The Court, however, found in favor of the appellant, emphasizing that the case did not warrant the denial of the benefit under Section 80, given the absence of malafide intent or deliberate evasion of tax. In conclusion, the Court allowed the Civil Miscellaneous Appeal, setting aside the penalties imposed and ruling in favor of the appellant on all substantial questions of law raised. The judgment clarified the requirements for invoking the extended period of limitation, establishing malafide intent, and imposing penalties under the Finance Act, 1994.
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