The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that even when an assessee has suppressed facts, the extended period of limitation can be evoked only when "suppression" is shown to be wilful with intent to evade the payment of service tax.
The two-member bench headed by Justice Dilip Gupta (President) and Raju (Technical Member) has observed that the show cause notice merely mentions that the appellant suppressed the value of taxable service. The show cause notice does not mention that the suppression was with the intention of evading payment of service tax.
The appellant/assessee is in the business of providing business auxiliary services in terms of section 65 (105)(zzb) of the Finance Act, 1994. The records of the appellant were scrutinised for the period from 2004-2005 to 2007-2008 by officers of the Central Excise and Service Tax, Lucknow. It was noticed that the appellant had not paid service tax on several items of work, though these were part of the service rendered by the appellant under business auxiliary service.
A show cause notice dated 24.10.2009 was, therefore, issued to the appellant demanding service tax by invoking the extended period of limitation as contemplated under section 73(1) of the Finance Act.
The Commissioner observed that the appellant had evaded payment of service tax by suppressing the correct value of taxable service.
The appellant submitted that the extended period of limitation could not have been invoked as it was not a case of the suppression of facts with the intent to evade payment of service tax.
The department contended that the Commissioner was justified in holding that the extended period of limitation had correctly been invoked. The show cause notice stated that the appellant had failed to pay service tax with the intent to evade payment of service tax.
The issue raised was whether the Department was justified in invoking the extended period of limitation of five years, as the show cause notice was issued on October 24, 2009 for the period 2004-2005 to 2007-2008.
The proviso to Section 73(1) of the Finance Act provides, "Where any service tax has not been levied or paid by reason of fraud or collusion or wilful suppression or suppression of facts or contravention of any of the provisions of the Chapter or the rules made thereunder with intent to evade payment of service tax, the provisions of the said section shall have effect as if, for the word "one year", the word "five years" had been substituted."
Section 73 (1) of the Act does not mention that suppression of facts has to be "wilful," since "wilful" precedes only misrepresentation. 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 Act, suppression of facts has still to be wilful with an intent to evade payment of service tax.
The Supreme Court and the Delhi High Court have held that suppression of facts has also to be "wilful" with an intent to evade payment of service tax.
The Supreme Court in the case of Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay, observed that since "suppression of facts" had 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 CESTAT held that the Commissioner was not justified in holding that the extended period of limitation under the proviso to section 73(1) of the Finance Act was correctly invoked.
The CESTAT noted that the commissioner has not only recorded the findings without giving reasons, but even otherwise, the order cannot go beyond the show cause notice.
Case Title: M/s T.S. Motors India Private Ltd. Versus Commissioner of CGST & Central Excise, Lucknow
Citation: Service Tax Appeal No. 70377 of 2018
Counsel For Appellant: Advocate Rinki Arora
Counsel For Respondent: Authorized Representative S. Shekhar