INVOKING OF LARGER PERIOD OF LIMITATION FOR DEMAND OF SERVICE TAX

[Mr. M. GOVINDARAJAN]

Sec.73 of the Finance Act, 1994 provides for recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. Sec. 73(1) provides that 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, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short levied or short paid or the person to whom such tax refund has erroneously been made, requiring to show cause why he should not pay the amount specified in the notice.

The limitation of the above said one year may be invoked up to five years from the relevant date by the department by means of the proviso to Sec. 73(1) where any 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
• willful misstatement; or
• suppression of facts; or
• contravention of any of the provisions of the service tax or of the rules made there under with intent to evade payment of service tax

by the person chargeable with service tax or his agent, the provisions of Sec. 73(1) shall have effect up to five years instead of one year.

In this article eight case laws are discussed in which the tribunals agreed or disagreed with the department in invoking the larger period of limitation for demand of service tax according to the facts and circumstances of the cases.

1. Phase 1 events & Entertainments Pvt. Ltd., V. Commissioner of Service Tax, Bangalore - [2008 -TMI - 31239 - CESTAT BANGLORE]

The appellant conducted a festival known as OKTOBERFEST. The appellant contended that it is a member of the Festival Committee and the Committee entrusted to organize the event. The appellant organized the program and did not receive any consideration. There is no client-service relationship. The appellants were under the bona fide belief that they were not liable for payment of service tax. The tribunal held in these circumstances the longer period cannot be invoked.

2. R.S. Travels V. Commissioner of Central Excise, Meerut - [2008 -TMI - 30076 - CESTAT NEW DELHI]

The point of dispute is as to whether the period of dispute the appellants were acting as 'Rent-a-cab' operator as defined under Sec. 65(91) of the Finance Act, 1994 and hence attracting service tax under Sec. 66 read with Sec. 65(105) (o) of the finance Act as contended by the Revenue or their activity was outside the purview of Rent-a-cab operator scheme as claimed by the appellant. The appellant had informed the department about his activity early to the department and there has been some correspondence between the appellant and the jurisdictional Assistant Commissioner. In view of this the tribunal held that the appellant cannot be accused of suppression of facts with intent to evade the payment of service tax, even he did not file the service tax returns. In view of this, only the normal limitation period under Sec. 73(1) of the Finance Act, 1994 would be available to the Revenue for recovery of non payment of service tax, if any.

3. Om Sai Professional Detective & Security Pvt. Ltd., V. Commissioner of Central Excise, Guntur - [2008 -TMI - 30212 - CESTAT BANGLORE]

The appellants had assessed the service tax on their own and voluntarily paid the same from January 2005 onwards.   Subsequently after one and half a year from payments made by the assessee, the Department issued a show cause notice for the period from 01.04.1999 to 31.03.2003. The Department was aware that the assessee was voluntarily paying the service tax. The assessee did not have any intention to evade payment of tax as they have followed the procedure laid down in the Income Tax Returns. This plea has been accepted by the Commissioner. In view of this, the tribunal held that the demands are time barred and cannot invoke the extended period of limitation.

4. Unitech Ltd., V. Commissioner of Service Tax, Delhi - [2008 -TMI - 31293 - CESTAT NEW DELHI]

The main dispute is as to whether during the period from 1.8.02 to 16.6.05 the appellants received Architect's services from M/s Callison Architecture Inc. USA who do not have any office or business establishment in India and whether the appellant as recipients of a taxable service from an offshore service provider are liable in terms of Rule 2(1)(d)(iv) of Service Tax Rules, 1994 to pay service tax paid by them to M/s Callison.

The tribunal observed that ST-3 return did not disclose the receipt of services from foreign service provider. Liability for import of service is in force with effect from 1.1.05. Payments made and service tax payable is not declared in ST-3.  Department was aware of non payment only on enquiry. The appellants, therefore, are guilty of willful suppressing the relevant information from the department and therefore longer limitation period of five years under proviso to Sec. 73(1) of the Act has rightly been invoked and penalties under Sec. 76 and 78 of the Act have been rightly imposed.

5. Amaravathi Co-Op Sugar Mills Ltd., V. Commissioner of Central Excise, Coimbatore - [2008 -TMI - 31471 - CESTAT, CHENNAI]

The show cause notice issued by the original authority did not propose to invoke larger period provided under Sec. 78 of the Act but in the revisional order the same was invoked. The tribunal held that invoking the larger period to confirm the demand was beyond the scope of the show cause notice basic to the proceedings.

6. Commissioner of Central Excise, Belgaum, V. Hiranyakeshi SSK Niyamat - [2008 -TMI - 31724 - CESTAT, BANGALORE]

Show cause notice was issued during 1998 without invoking larger period. Subsequent show cause notice was issued for the same issue, for the same amount and for the same period invoking larger period. The tribunal held that it is not sustainable.

7. PT Education & Training Services Ltd., V. Commissioner of Central Excise, Vadodara - I - [2008 -TMI - 31780 - CESTAT AHMEDABAD]

It is clear from the correspondences made between the appellants and the department that the fact that the appellant had collected advance fees from their students for the services to be provided was in the knowledge of the revenue. Not only that the Superintendent had also calculated the tax amount which quantification was accepted by the appellant. As such the findings of the authorities below that the appellant had not disclosed the factual position to the Revenue are contrary to the evidence on record. In as much as the entire information was in the knowledge of the Revenue, the longer period of limitation is not available.

8. Ghanshyam Transport V. Commissioner of Central Excise & Customs, Vadodara - [2008 -TMI - 31750 - CESTAT AHMEDABAD]

There was failure on the part of the appellant in not taking the registration and non furnishing of relevant information.   Therefore the Commissioner's decision in upholding the imposition of penalty and invocation of the extended time limit for demand of tax are justified.