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TMI Blog2025 (4) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, as the appellant had made payment of service tax with interest prior to the issuance of the show cause notice. The adjudicating authority and the Commissioner (Appeals) have not denied that payment of the service tax with interest was made by the appellant before the issuance of the show cause notice, but the benefit of the provisions of section 73(3) of the Finance Act have been denied to the appellant because of the applicability of sub-section (4) of section 73 of the Finance Act, which provides that nothing contained in sub-section (3) shall apply to a case where any service tax has not been 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 of the rules made thereunder with intent to evade payment of service tax. 3. The appellant is inter alia, engaged in the generation of solar electricity in plants situated at Jodhpur in the State of Rajasthan and Lalitpur in the State of Uttar Pradesh. The appellant supplies solar power to the Governments of Rajasthan and Uttar Pradesh. 4. In the course of normal business operations, the appellant claims that it availed commercial loans d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requested the department to construe the letter dated 11.08.2014 as an intimation under section 73(3) of the Finance Act. 9. Subsequently letters were exchanged between the department and the appellant and simultaneously summons were also issued to the appellant under section 14 of the Central Excise Act, as made applicable to service tax matters by section 83 of the Finance Act. The appellant intimated the department that non-payment of service tax was non- deliberate and unintentional. 10. However, a show cause notice dated 31.01.2017 was issued to the appellant alleging that the services provided by foreign service providers would be leviable to service tax under "banking or other financial services", as defined under section 65(12) and made taxable under section 65(105)(zm) of the Finance Act under the reverse charge mechanism in terms of rule 3 of the Place of Provision of Service Rules, 2012 the 2012 Rules w.e.f 01 .07.2012 and rule 2(1) (d) (G) of the Service Tax Rules, 1994 the Service Tax Rules read with section 66C of the Finance Act w.e.f. 01.07.2012. It was further alleged that the appellant had wilfully suppressed the taxable service received from outside India and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel pointed out that the provisions of sub-section (4) of section 73 of the Finance Act would not be applicable in the present case. Learned counsel also submitted that the extended period of limitation could not have been invoked in the facts and circumstances of the case. 17. Shri Manoj Kumar, learned authorized representative appearing for the department, however, supported the impugned order passed by the Commissioner (Appeals) and contended that it does not call for any interference in this appeal. 18. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 19. In order to appreciate the contention advanced by the learned counsel for the appellant, it would be appropriate to reproduce sub- sections (3) and (4) of section 73 of the Finance Act and the relevant portions are: "73(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47,65,677/- (S. Tax: Rs. 46,26,842/- + Edu. Cess: Rs. 92,537/- + S.H.E. Cess: Rs. 46,298/-), as detailed above, xxxxxxxxxxx. However, till initiation of inquiry by DGCEI, they have not deposited any amount of Service Tax leviable on aforesaid taxable service. xxxxxxxxxxxx 15. Now, therefore, M/s. Jakson Power Pvt. Ltd, 626, 6th Floor, Tower-A, DLF Tower, Jasola, New Delhi-110076, are hereby called upon to show cause to the Assistant/Deputy Commissioner, Service Tax Division-X, Service Tax Commissionerate Delhi-II, New Delhi having his office at the office of Commissioner of Service Tax, Delhi-II situated at 37, 2nd Floor. Nehru Place, New Delhi-110019, within 30 days of the receipt of this Show Cause Notice as to why:- xxxxxxxxxx (iii) an amount of Service Tax of Rs. 47,65,677/-, deposited by them vide GAR-7 Challan No. 1360, dated 25.07.2014, should not be appropriated against the Service Tax as demanded and mentioned at (ii) above; xxxxxxxxxx (v) an amount of Service Tax of Rs. 13,98,358/-, deposited by them vide GAR-7 Challan No. 1360, dated 25.07.2014, should not be appropriated against the interest as demanded and mentioned at (iv) above;" (emphasis supplied) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge Mechanism under the category of "Banking & Other Financial Services" (Annexure-B referred). It is also evident that the said payment was made within 12 days from the date of receipt of the first summon dated 07.07.2014 i.e. 30 months ahead of issuance of the impugned SCN. Further, the Noticee vide its letter dated 11.08.2014 (within 30 days from the date of receipt of the first summon dated 07.07.2014) also intimated the said payment of service tax to the Central Excise Officer in accordance with the provisions of Section 73(3) of the Act (Annexure-C referred). All the facts, stated under Para 4.1 to 4.3 above, were brought to the notice of the Department during the course of the enquiry of the case through correspondence with the Department (Annexure-D referred). Thus, there is no suppression of facts, fraud, collusion etc. on the part of the Noticee, hence, the issuance of the impugned SCN is not warranted in the present case and the same is liable to be dropped." (emphasis supplied) 24. The relevant portion of the reply filed by the appellant dealing with the extended period of limitation is reproduced below: "E.4 xxxxxxxxx. Accordingly, in the present case also, true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 70 of the Act ibid, the provisions of proviso to Section 73(1) of the Finance Act, 1994 as well as the provisions of Section 73(4) of the Finance Act, 1994 apply. (emphasis supplied) 26. With regard to the invocation of the extended period of limitation, the adjudicating authority observed: "22.6 In the instant case, the information regarding the element of non-payment of Service Tax by M/s Jakson under reverse charge mechanism is having genesis only after the investigations conducted by the Department and without which the short payment of Service Tax could not have been detected. Moreover, in the present case, M/s Jakson neither submitted nor placed any evidence on record that their impugned activities were in the knowledge of the Department. Thus, it is evident that M/s Jakson did not disclose the material facts by itself. 22.7 The intention to evade Service Tax is not required to be calculated on mathematical precision in the regime of self-assessment, especially when the party itself makes the assessment. Therefore, I find that it was the bounden duty of M/s Jakson to disclose all the facts. Any deviation from this would tantamount to intent to evade payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Spinning Mills (P) Ltd. Vs. CCE Coimbatore [2004 (166) ELT 154 (SC)]. I observe that the appellants had been registered with Service Tax department since October 2013 and were working under the self assessment scheme. It was essential for them to work out their tax liability appropriately and pay the same as per the scheme of the Finance Act, 1994 such as in Section 68 and 70 of the said Act. In such a situation preponderance of probability favours revenue [NR Sponge Pvt. Ltd. Vs. CCE (2015 (328) ELT 453 (Tri-Del)]. Therefore, I do not agree with the contention of the appellants that provisions of Section 73(4) do not apply to their case. 15. The appellants have also submitted that they had no intention to evade payment of Service Tax as the transaction was revenue neutral since they could avail Cenvat Credit of the Service Tax paid or payable. In this regard, I find that this hypothetical situation does not mean non-payment of tax. There is no provision such as revenue neutral for tax liability. Further, the credit is admissible only when the service received is an input service. Thus, this submission of the appellants is not acceptable and they had to pay Service tax payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Finance Act, 1994) xxxxxxxxxx 11. xxxxxxxx. By willful act of suppression and mis- declaration with sole intention to evade Service Tax, the extended period of five years, as provided in proviso of sub-section (1) of Section 73 of Finance Act, 1994 is invocable for demanding and recovering the Service Tax in the subject matter. Consequently, M/s. Jakson also appears to be liable to pay interest as per Section 75 of the Finance Act, 1994 for delayed payment of aforesaid amount of Service Tax." 32. Secondly, section 73(1) of the Finance Act provides for issuance of the show cause notice in a case where service tax has not been paid. An artificial distinction, without any basis, has been drawn by the adjudicating authority between cases where a notice is issued on the basis of returns filed by an assessee and where a notice is issued on the basis of some investigation carried out by the department. The provisions of sub-sections (3) and (4) of section 73 of the Finance Act were clearly applicable. 33. The Commissioner (Appeals) has, however, placed reliance on the provisions of sub-sections (3) and (4) of section 73 of the Finance Act. The reason for denying the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 Central Excise 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 is in this context that the Supreme Court observed that since "suppression of facts‟ 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hone Nigam Ltd. vs. Union of India and others W. P. (C) 7542 of 2018 decided on 06.04.2023. The Delhi High Court observed that merely because MTNL had not declared the receipt of compensation as payment for taxable service, does not establish that it had wilfully suppressed any material fact. The Delhi High Court further observed that the contention of MTNL that receipt was not taxable under the Act is a substantial one and no intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. The relevant portion of the observations are: "28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mere non-payment of service tax is not sufficient for invoking the provisions of sub-section (4) of section 73 of the Finance Act for the department has to substantiate that non-payment of service tax was with an intent to evade payment of service tax. Some evidence would, therefore, have to be led by the department, though it may not be with mathematical precision. 43. What also prevailed over the Commissioner (Appeals) was the fact that the appellant was working under a self assessment scheme. According to Commissioner (Appeals) it was essential for the appellant to work out the tax liability appropriately in such a situation and pay the same. 44. It is not possible to accept this view of the Commissioner (Appeals). Even in a case of self-assessment, the department can always call upon an assessee and seek information and it is the duty of the proper officer to scrutinize the correctness of the duty assessed. The departmental instructions issued to officers also emphasise that it is the duty of the officers to scrutinize the returns. 45. In this connection, reference can be made to the decision of the Tribunal in M/s. Raydean Industries vs. Commissioner CGST, Jaipur Excise A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose, Instructions issued by the department also specifically require officers at various levels to do so." (emphasis supplied) 46. 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, the Tribunal made similar observations and they are as follows: "16. Another ground for invoking extended period of limitation given 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that the proper officer may, on the basis of information contained in the return filed by the assessee under 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) 49. Civil Appeal No. 4246 of 2023 (Commissioner of CGST, Customs and Central Excise vs. Sunshine Steel Industries) filed by the department before the Supreme Court to assail the aforesaid decision of the Tribunal in Sunshine Steel Industries was dismissed by the Supreme Court on 06.07.2023 and the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has not contested and is still not contesting the demand of service tax." (emphasis supplied) 53. In C.C.E. & S.T., LTU, Bangalore vs. Adecco Flexione Workforce Solutions Ltd 2012 (26) S.T.R. 3 (Kar.), the Karnataka High Court observed: "2. Facts are not in dispute. The assessee has paid both the service tax and interest for delayed payments before issue of show cause notice under the Act. Sub- sec. (3) of Section 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under sub-sec. (1) in respect of the amount so paid. Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Sec. 76 of the Act." 54. The impugned order that adjudicates the show cause notice and confirms the demand would, therefore, have to be set aside for this reason alone. 55. It would, therefore, not be necessary to examine the contention raised by the learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts of the present case. 56. The impugned order d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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