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TMI Blog2023 (10) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... act etc. - the appellant is liable to discharge service tax on the Guarantee commission paid to Government of Karnataka during the period 01.07.2012 to 31.03.2016 for providing unconditional and irrevocable guarantee in raising funds from the debt market. Extended period of limitation - HELD THAT:- The extended period of limitation could be invoked only when evidence collected lead to an inference that there has been fraud, collusion, suppression, misdeclaration or contravention of any of the provisions with intent to evade payment of duty. In the present case, the Department has failed to place on record evidence indicating that there has been intention not to discharge service tax on the guarantee commission even though the appellant has been aware of the legal position that service tax is payable on guarantee commission paid to the State government of Karnataka for providing irrevocable guarantee in raising funds from debt market. Moreover, the appellant is a public sector undertaking and in the absence of specific evidence to support that there has been intentional evasion of service tax, extended period cannot be invoked merely on finding the failure on their part to disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sector undertaking of the Government of Karnataka and was formed exclusively for the development of Upper Krishna River multipurpose irrigation project for utilization of Krishna River water allocated to the State of Karnataka under Bachawat Award. The appellant is mostly supported by the State budget and earns very little revenue from the farmers and the water used for irrigation is almost free of cost. Karnataka Power Corporation has set up a medium size hydel power project using the water from the reservoir owned by the appellant, on which royalty is earned. Further, some water rates are collected from industrial consumers, otherwise, the appellant has only miscellaneous income such as rent from shops and various offices in their residential colony. 3.2 Upper Krishna project was financed from borrowed funds by issuing bond , which was guaranteed by the Government of Karnataka. Towards this guarantee, the appellant pays 1% of the guarantee sum as guarantee commission. Periodically the appellant also raises money from Banks for construction operation and maintaining the reservoir and canals, for which guarantee is given by the Government of Karnataka. 3.3 It is his submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r financial institution, guarantee given by it, cannot be classified under SSBC. In support, he refers to the judgment of Hon ble Delhi High Court in the case of Olam Agro Industries Ltd vs. CCE 2014 (33) STR 234 (Del.). 3.9 Further, assailing confirmation of the demand invoking extended period, the ld. Advocate has submitted that even though the investigation was commenced in June, 2015, but the show cause notice was issued to the appellant in October, 2017 and during these two years only two letters were issued. It is his contention that invoking the extended period of limitation ought to have ended with the date of commencement of investigation. Any demand thereafter ought to be considered subject matter of second and subsequent statement of demand. 3.10 Further, he has submitted that the appellant has paid service tax of Rs. 8,43,87,602/- on guarantee commission after the omission of the definition of support service which was paid in normal course under self-assessment from 01.04.2016 is not tax short paid or short levied. Hence, inclusion of that amount in the demand raised is bad in law as the appellant has filed periodically ST-3 returns during the said period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pting the said services as taxable service discharged service tax on the same and does not dispute the same in the present appeal. However, for the period 01.07.2012 to 31.03.2016, they resisted levy of service tax on the ground that definition of support service under Section 65B(49) of the Finance Act, 1994 does not cover the service of guarantee received by the Appellant from Government of Karnataka for raising funds from the debt market. 8. Support Service has been defined under Section 65B(49) reads as follows: (49) support service means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis. 9. The ld. Commissioner in the impugned order referring to the definition of service introduced w.e.f. 01.07.2012 under Section 65B(44), Taxable service under Section 65B(51), negative list of services prescribed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eflected in the periodical ST-3 returns filed with the department; thus, non-mentioning in the ST-3 Statutory Returns indicate their intention to evade tax by suppressing vital and relevant facts. 12. The investigation was conducted by DGCEI somewhere around June 2015 and statements of Shri K. Somashekhar and Shri Charles Sujay Kumar were recorded. In the said statements, it has been admitted that the guarantee commission was paid to the Karnataka State government but service tax was not discharged on the same. It was clearly stated that the policy decision with regard to the discharge of service tax rests with Sri R.S. Pasupathi, Chief Executive Officer(Finance) and Shri Ajay Seth, Managing Director of the company. But, the said officials of the company were not examined to ascertain as to why the service tax was not paid by the appellant company, even though tax on various other services received were discharged on reverse charge mechanism basis. The extended period of limitation could be invoked only when evidence collected lead to an inference that there has been fraud, collusion, suppression, misdeclaration or contravention of any of the provisions with intent to evade paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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