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2025 (1) TMI 626 - AT - Service TaxInvocation of extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994 for demanding service tax for the periods April 2008 to March 2012 and April 2012 to March 2013 - willful suppression of facts or not - HELD THAT - Mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax. In THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS AND ANOTHER VERSUS M/S RELIANCE INDUSTRIES LTD. AND COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S RELIANCE INDUSTRIES LTD. 2023 (7) TMI 196 - SUPREME COURT , the Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona-fide manner. An assessee may genuinely believe that duty is not leviable, while the department may believe that duty is leviable. The assessee may, therefore, not pay duty in the self-assessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, atleast one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self assessment - merely because facts came to light only during the audit does not prove that there is an intent on the part of the assessee to evade payment of duty. There is, therefore, no reason as to why the show cause notice should have been issued beyond the normal period of limitation for the period from April 2008 to March 2012, nor there is any justification for issuing the show cause notice dated 22.10.2014 for the subsequent period from April 2012 to March 2013. It is, therefore, clearly a case where the facts were in the knowledge of the department and the department cannot allege that facts had been suppressed. In any case, even if it is assumed that facts were suppressed by the appellant then too no reason has been assigned in the orders passed by the Joint Commissioner or the Commissioner (Appeals) that such suppression was with an intent to evade payment of service tax. Conclusion - The extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act could not have been invoked in the facts and circumstances of the case. Appeal allowed. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue: Invocation of Extended Period of Limitation Relevant legal framework and precedents: The legal framework revolves around section 73(1) of the Finance Act, 1994, which allows for a one-year limitation period for issuing a show cause notice for service tax recovery. However, the proviso extends this period to five years in cases involving fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax. The Supreme Court and various High Courts have consistently held that suppression of facts must be "willful" and with intent to evade tax for the extended period to apply. Court's interpretation and reasoning: The Tribunal examined whether the department could invoke the extended limitation period based on the alleged suppression of facts by the appellant. It emphasized that mere non-disclosure or omission does not constitute suppression unless it is deliberate and with intent to evade tax. The Tribunal referenced several precedents where courts held that suppression must be willful and with intent to evade payment. Key evidence and findings: The Tribunal noted that the department had previously issued a show cause notice to the appellant for an earlier period, indicating that the department was aware of the appellant's activities. The Tribunal found no evidence of willful suppression or intent to evade tax by the appellant. Application of law to facts: The Tribunal applied the legal principles established in various precedents to the facts of the case. It concluded that the department's knowledge of the appellant's activities and the absence of any deliberate intent to evade tax precluded the invocation of the extended limitation period. Treatment of competing arguments: The appellant argued that the demands were time-barred as the department was already aware of the facts. The department contended that the extended period was applicable due to suppression of facts. The Tribunal sided with the appellant, finding no willful suppression or intent to evade tax. Conclusions: The Tribunal concluded that the extended period of limitation could not be invoked as there was no willful suppression of facts or intent to evade tax by the appellant. Consequently, the demands were time-barred. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "It would transpire from the aforesaid decisions that mere suppression of facts is not enough and there must be a deliberate and willful attempt on the part of the assessee to evade payment of duty." Core principles established:
Final determinations on each issue:
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