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TMI Blog2024 (12) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be wilful‟ and there should also be an intent to evade payment of service tax. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The said proviso to pari materials the proviso to section 73(1) of the finance Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It would transpire from the aforesaid decision that mere suppression of facts is not enough and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suppressed with intention to evade payment of service tax. The reply also mentions that the show cause notice was issued on the basis of entries made in the balance sheet which were available to the department when the search was carried out. The extended period of limitation, therefore, could not have been invoked. The impugned order dated 16.11.2016 passed by the Commissioner (Appeals), therefore, deserves to be set aside on the sole ground that 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. The order dated 16.11.2016 passed by the Commissioner (Appeals) is, therefore, set aside - Appeal allowed. - SHRI DILIP GUPTA, PRESIDENT AND MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Shri Ankur Upadhyay, Advocate for the Appellant Shri Harshvardhan, Authorised Representative for the Department ORDER This appeal has been filed by Teena Gupta [the appellant] to assail the order dated 16.11.2016 passed by the Commissioner (Appeals) upholding the order dated 28.03.2014 passed by the Joint Commissioner that confirms the demand of service tax upon the appellant with in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 1994 for failure to pay service tax. 13. The Noticee has not taken the service tax registration and they have failed to file ST-3 return and therefore, they are liable for penalty under Section 77 of Finance Act, 1994 for failure to file ST-3 return. 14. The Noticee was request to submit the balance sheet for the year 2008-09 to 2011-12 by issuing several letter and reminders But despite of issuing several letters and reminders they have not submitted the desired documents and thus suppressed the fact from the department with intention to evade service tax and thus, they have render them self liable for penalty under Section 78 of the Finance Act, 1994. 5. The appellant filed a reply to the show cause notice and contended that the invocation of the extended period of limitation could not have been invoked. The relevant paragraphs 8, 9 and 10 of the reply filed by the appellant are reproduced below: 8. The Noticee at the outset submit that in the present case the demands made in the show cause notice are absolutely time barred and are therefore liable to be set aside on this ground alone. In the show cause notice in para 2 it has been stated that the on 04.02.2008, the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable event. Thus the show cause notice is clearly time barred and is required to be set aside on this ground alone. 9. Secondly the show cause notice is time barred as at the one hand the department was in knowledge of all the facts and on the other hand there are no grounds to allege any suppression or malafide intention of the Noticee with intention to evade payment of service tax. Even the show cause notice does not point out any instance which can show that the Noticee has suppressed anything from the department with malafide intention. In such circumstances that when the department came to know of the renting of buses by the noticee and the noticee had no malafide intention, the invocation of longer period of limitation for issuance of show cause notice is absolutely illegal. Since all the facts about the activities of the Noticee were in the knowledge of the department, it cannot be said the Noticee have suppressed the facts with intent to evade the payment of service tax. In such circumstances, the demand is barred by the limitation. Thus there was no suppression or mis- declaration nor any intention to evade payment of service tax on the part of the Noticee and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 in a much as they failed to file periodical return (ST3). 31. Further in respect of suppression I find from the para 6 of the Show cause Notice dated 17.03.13 it is specifically mentioned that the noticee had deliberately suppressed the fact of taxable services and not paid the service tax on them intentionally. Therefore the extended period under section 73 had been rightly invoked. In his regard I also find support from the Judgment of the Honb'le Supreme Court in the matter of Commissioner of Central Excise Vishakhapatnam V/s M/s Mehta Co. 2011-TIOL-17- SC-CX, Civil Appeal No. 1090 of 2009 which has held that a show cause notice issued within five years from the date of knowledge is valid. Therefore the case laws cited by the noticee are not acceptable in the instant case The noticee has taken the plea that the matter came to knowledge of the department in 2003. However, I find that the show cause notice covered the period from 2008-09 to 2011-12 accordingly by application of the above Judgment of Honb'le Supreme Court the show cause notice is rightly issued in accordance with the provisions of section 73(1) of the Finance Act, 1994. (emphasis supplied) 7. The Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t date means,- (i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; 11. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word one year , the word five years has been substituted. 12. It is correct that section 73 (1) of the Finance Act does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3; has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows: 4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date . But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944. 17. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I [2007 (216) E.L.T. 177 (SC)] also held: 10. The expression suppression has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or collusion and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. (emphasis supplied) 18. The D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTNL had suppressed material facts for evading its tax liability, is sustainable. xxxxxxxx 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL‟s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment. (emphasis supplied) 22. The Tribunal in M/s. Kalya Constructions Private Limited vs. The Commissioner, Central Excise Commissionerate, Udaipur [Service Tax Appeal No. 54385 of 2015 decided on 15.11.2023] observed as follows: 11. Both the SCNs further sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules. (emphasis supplied) 24. Civil Appeal No. 4246 of 2023 (Commissioner of CGST, Customs and Central Excise vs. Sunshine Steel Industries) filed by the department to assail the aforesaid decision of the Tribunal in Sunshine Steel Industries was dismissed by the Supreme Court on 06.07.2023 and the judgment is reproduced below: Delay condoned. 2. Heard learned counsel for the appellant. 3. This Court is not inclined to interfere with the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed export clearances. Separate disclosures were required to be made only for exports under bond and not for deemed exports, which are a class of domestic clearances, entitled to certain benefits available otherwise on exports. There was therefore nothing wrong with the assessee s action of including the value of deemed exports within the value of domestic clearances. (emphasis supplied) 26. Very recently, in Commissioner CGST Delhi South vs. Air India Ltd. [SERTA 18/2024 decided on 22.10.2024] , the Delhi High Court held: 17. It is material to note that there is no allegation against the assessee of any statutory contravention with an intent to evade tax. The case of the Revenue is solely premised on the basis that there was suppression of facts on the part of the assessee. Clearly, not producing the documents, which may be necessary for substantiating a claim, does not fall in the exception of suppression of facts . In any view of the matter, no express allegations were made in the SCN to the said effect. 27. What, therefore, transpires from the aforesaid decisions is that there can be a difference of opinion between the department and an assessee. An assessee may genuinely believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay to day record of M/s. Hans Travel were scrutinized by the officers of the department but even the financial records were scrutinized. The reply also mentions that no reasons had been stated as to why the facts were suppressed with intention to evade payment of service tax. The reply also mentions that the show cause notice was issued on the basis of entries made in the balance sheet which were available to the department when the search was carried out. The extended period of limitation, therefore, could not have been invoked. The Joint Commissioner merely noted that since facts were suppressed there was an intention to evade payment of service tax. The Commissioner (Appeals) without were giving any reasons has found that there was no infirmity in invoking the extended period since the period was within five years. 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) as to why such suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X
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