Finance Act, 1994 | Mere Non-Registration Under Service Tax Isn't Fraud Or Suppression To Justify 5 Year Limitation: Patna High Court

The Patna High Court has recently quashed a service tax demand raised against a government contractor, ruling that merely not registering for service tax could not be equated with fraud or suppression of facts warranting the application of the five-year extended limitation period under the Finance Act, 1994.

The Division Bench comprising Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey, observed, “the plea of the respondent that the petitioner had not taken registration of the service tax would alone not be a reason to believe that he has committed a fraud or has wilfully suppressed his liability to pay the tax. Rule 4A casts a duty upon every person providing taxable service (not later than thirty days from the date of completion of such taxable service whichever is earlier to issue an invoice, a bill or as the case may be a challan signed by such person or a person authorised by him in respect of such taxable service provided or agreed to be provided.”

“The Challan has to contain the name, address of the registration number of such person and name and address of the person receiving taxable service. It will also contain the description and value of taxable service provided or agreed to be provided and the service tax payable thereon. In this case, admittedly, the respondent no. 4 did not issue any invoice, bill or challan,” the bench emphasized.

The above ruling was made in a writ petition filed by one Anil Kumar Singh, a government contractor in Bihar, challenging challenging a demand-cum-show cause notice and demand order issued by the Assistant Commissioner, CGST & CX, Purnea Division, whereby it was alleged that the petitioner was had defaulted on a payment of ₹3,05,794 in service tax on royalty subtracted from his bills during the financial year 2016–17.

The Court in its judgement observed, “We have noticed that in this case, the petitioner is a Government Contractor and the services availed by him has been found exempted under the Mega Exemption Notification No. 25 of 2012. In fact, Annexure 'P/2' clearly admits that the activity of the petitioner is exempted under Mega Exemption Notification No. 25/2012 dated 20.06.2012 and as such no service tax is leviable on the said activity.”

The Court found force in the submission of the petitioner that, “had the Government Department issued invoice as required under Rule 4A of the Service Tax Rules, 1994, he would have come to know the requirement of payment of service tax and the rate at which it was required to be paid.”

The Court pointed out, “The relevant Rule which we have taken note of hereinabove is mandatory as it casts a duty upon every person liable for paying the service tax to make an application to the concerned Superintendent of Central Excise in Form ST-1 for registration within the 30 days from the date in which the service tax under Section 66B of the Finance Act is levied.”

Notably, proviso to Sub-Rule (1) of Rule 4 further says that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement.

The Court opined that it was not one of those cases in which the petitioner may be said to have committed a fraud or acted with an intention to evade the service tax. The Court noted that the show cause was barred by limitation, and the benefit of extended period of limitation would not be available to the Assistant Commissioner, CGST and CX.

Hence, the High Court quashed both the demand-cum-show cause notice and the order confirming the tax demand and accordingly allowed the writ petition

Case Title: Anil Kumar Singh v. The Union of India and Others

LL Citation: 2025 LiveLaw (Pat) 39

Click Here To Read Judgement