Department Cannot Invoke Extended Period Of Limitation Merely Because Returns Were Self-Assessed: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that the department cannot invoke the extended period of limitation merely because the returns were self-assessed. The Bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that “Mere suppression of facts is not enough to invoke the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act. The suppression has to be with an intent to evade payment of service tax and for this purpose the show cause notice must specifically allege why the asseessee has suppressed facts with intent to evade payment of service tax.” In this case, the assessee was engaged in providing construction for commercial and industrial building services and claims to have paid service tax on these services. The assessee claims that it discharged service tax liability on advance receipts for construction services and on legal services under the reverse charge mechanism. A show cause notice was issued demanding service tax, invoking the extended limitation period as per Section 73(1) of the Finance Act. To which, the assessee contended that neither the demand was sustainable on merits, nor the extended limitation period could have been invoked in this case. The Commissioner, however, did not accept the contention raised by the assessee and observed that the department places trust on an assessee under the self-assessment scheme and, therefore, filing improper returns and not disclosing the actual value of services provided, would amount to intentional suppression of facts. Aggrieved by the decision of Commissioner the assessee filed an appeal before the Tribunal. The assessee contended that the demand was not sustainable on merits, but also that the extended period of limitation could not have been invoked in the facts and circumstances of the case. Also, the demand of service tax on advances received from customers has been erroneously calculated on the closing balance of advance received and the demand of service tax on legal and professional services is not justified as the demand is towards the services of Chartered Accountant and on legal services from advocates. The Tribunal observed that the assessee had not suppressed facts, much less with an intent to evade payment of service. The assessee also pointed out that specific allegations had not been made in the show cause notice regarding any mala fide intention in suppressing facts. The Tribunal found that the show cause notice merely alleges that as the assessee did not disclose proper value of taxable services in the ST-3 returns, payment of service tax amounting to Rs. 2,40,96,546/- escaped assessment resulting in contravention of various provision of the Finance Act and the Rules with intention to evade payment of service tax. “Even under the self-assessment scheme, the Tribunal has repeatedly held that the proper officer can always seek information from the asseessee, and it is the duty of the proper officer to scrutinize the correctness of the duty assessed by the asseessee. The department cannot invoke the extended period of limitation merely because the returns were self-assessed. The Commissioner fell in error in holding that the extended period of limitation can be invoked if facts come to the notice of the department during investigation since the proper officer could have ascertained the facts. The Commissioner also fell in error in holding that “suppression of facts clearly leads to the conclusion that the Notice had intention to evade tax” added the bench. In view of the above, the Tribunal allowed the appeal. Counsel for Appellant/ Assessee: Shaubhik Gupta Counsel for Respondent/ Department: Jaya Kumar Case Title: M/s. Wellworth Project Developers Private Limited v. Commissioner of Commissioner of CGST Case Number: Service Tax Appeal No. 50259 of 2024 Click Here To Read/Download The Order

Department Cannot Invoke Extended Period Of Limitation Merely Because Returns Were Self-Assessed: CESTAT

Mehak Dhiman

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