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TMI Blog2025 (1) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... L 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 operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. Though number of submissions were advanced by Shri Ankur Upadhyay, learned counsel for the appellant for setting aside the demands raised under the aforesaid three heads of service but learned counsel for the appellant submitted that the impugned order deserves to be set aside for the sole reason that the show cause notice was issued beyond the period stipulated in the proviso to section 73(1) of the Finance Act 1994 [the Finance Act], as it stood at the relevant time. In this connection, learned counsel pointed out that in respect of the aforesaid three services, earlier a show cause notice dated 01.10.2009 was also issued to the appellant for the period 2004-05 to March 2008. Thus, when all facts were in the knowledge of the department in 2009, powers under the proviso to section 73(1) of the Finance Act could not have been invoked in the present show cause notice that was issued on 12.03.2013 for the subsequent period from April 2008 to March 2012. In support of this contention, learned counsel placed reliance upon certain judgments to which reference shall be made at the appropriate stage. 5. Likewise, in Service Tax Appeal No. 51813 of 2017, learned counsel for the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 the demands are hit by limitation of time being, beyond period of one year. From all the undisputed factual position, the allega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued on 12.03.2013 and covers the financial year 2008-09 to 2011-12. I find no infirmity with the issue of the demand and the period covered is well within 5 years. I have also considered the case laws relied upon by the appellants but find that the ratios of these cases are not in conformity of the circumstances of the appellants s case. (emphasis supplied) Service Tax Appeal No. 51813 of 2017 11. The show cause notice dated 22.10.2014 was issued to the appellant under section 73(1A) of the Finance Act. Neither the adjudicating authority nor the Commissioner (Appeals) have examined the issue relating to invocation of the extended period of limitation. 12. In order to appreciate the contention that has been made by the learned counsel for the appellant, it would be appropriate to reproduce section 73 of the Finance Act as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows: 73.(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the said section shall have effect as if, for the word one year , the word five years has been substituted. 16. It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be wilful‟ since wilful‟ precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression wilful before suppression of facts 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. 17. Before adverting to the decisions of the Supreme Court and the Delhi High Court, it would be useful to reproduce the proviso to section 11A of Central Excise Act, 1944, as it stood when the Supreme Court explained suppression of facts in Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay [ 1995 (78) E.L.T. 401 (SC) ] . It is as follows: 11A: Where any duty of excise has not been levied or paid or has been short-levied or short-pain or erroneously refunded, by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings 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. (emphasis supplied) 19. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [ 2005 (188) E.L.T. 149 (SC) ] and the observations are as follows: 26 .. This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression suppression of facts in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :- In taxation, it ( suppression of facts ) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement 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) 22. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) [ 2018 (12) GSTL 368 (Del.) ] also examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Finance Act and held as follows: 27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word suppression‟ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. fraud, collusion, wilful misstatement . As explained in Uniworth (supra), misstatement or suppression of facts does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty. xxxxxx Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated 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 contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. (emphasis supplied) 24. It would transpire from the aforesaid decisions 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. 25. This issue was also examined at length by this Bench in M/s G.D. Goenka Private Limited vs. The Commissioner of Central Goods and Service Tax, Delhi South [ Service Tax Appeal No. 51787 of 2022 dated 21.08.2023 ] and after referring to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 state that had the audit not conducted scrutiny of the records, the short paying the service tax would not have come to notice. It is a matter of fact that all the details were available in the records of the appellant. The appellant was required to furnish returns under section 70 with the Superintendent of Central Excise which it did. It is for the Superintendent to scrutinize the returns and ascertain if the service tax had been paid correctly or not. If the assessee either does not make the returns under section 70 or having made a return, fails to assess the tax in accordance with the provisions of Chapter or Rules made thereunder, the Superintendent of Central Excise can make the best judgment assessment under section 72. For this purpose, he may require the assessee to produce such accounts, documents or other evidence, as he may deem necessary. Such being the legal position, if some tax has escaped assessment which came to light later during audit, all it shows is that the Superintendent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 impugned order of the High Court (Sic). 4. The appeal is dismissed. 5. Pending applications, if any, are disposed of. 29. In Commissioner of C. Ex. Customs vs. Reliance Industries Ltd. [ 2023 (385) E.L.T. 481 (S.C.) ] , 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. The relevant portion of the judgment of the Supreme Court is reproduced below: 23. We are in full agreement with the finding of the Tribunal that during the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the said effect. 31. 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 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. If some duty escapes assessment, the officers of the department can always call upon the assessee to submit further documents and he may also conduct an enquiry. In fact when an audit is conducted, the officers of the audit team scrutinize the records and, therefore, notice should be issued within the stipulated time from the date the audit was conducted. Even otherwise, 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. 32. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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