2023 (3) TMI 584 - HC - Service Tax

Levy of service tax - Fee collected by the SEBI for various activities - in the nature of "Discharging of sovereign function" or not - non-filing of proper returns - applicability of extended period to the demand of Service Tax in the first Show Cause Notice - demand for normal period as per provisions of section 73(2A) of the Finance Act, 1994 - violation of principles of Natural Justice (second SCN) - legality in remanding back the second Show Cause Notice without considering that the same was issued as a statement of demand under Section 73(1A) of Finance Act, 1994.

HELD THAT:- In the present case, Paragraph Nos. 7 to 9 of the show cause notice dated 17/03/2016 (first SCN) refers to all the correspondence between the respondent and the Commissioner. However, it does not refer to any specific instances of fraud, collusion, misstatement or suppression of facts indulged in by the respondent. At Paragraph No. 10 of the first show cause notice, the Department only states that it appears from the correspondence referred to therein that the respondent has wilfully suppressed facts from the Service Tax Department with an intention to evade payment of service tax. It does not specify any material particulars of how wilful misstatements or suppression of facts has been indulged in by the respondent or in what manner the acts of the respondent are wilful or with an aim to evade tax.

In Cosmic Dye Chemical [1994 (9) TMI 86 - SUPREME COURT], the Hon'ble Supreme Court has also considered a similar issue on the question of what constitutes fraud, collusion or wilful misstatement or suppression of facts for the purpose of invocation of the extension of period of limitation under section 11-A of the Excise Act, where it was held that [1994 (9) TMI 86 - SUPREME COURT] - From a reading of the decision of the Hon'ble Supreme Court, it would be incumbent upon the appellant to demonstrate from the correspondence / material on record or on the specific averments made in the first show cause notice, as to how the respondent has indulged in fraud, collusion or wilful misstatement or suppression of facts. In fact all disclosures as required by the earlier notice issued by the appellant were made by the respondent in its correspondence laid before the Appellant.

Thus, the finding of fact arrived at by the CESTAT to the effect that there was no suppression, misrepresentation or fraud committed by the respondent, to enable the appellant to invoke the extended limitation clause in Section 73 is proper and based upon the correct appreciation of the record. Accordingly, it is concluded, that the substantial questions raised by the appellant in its appeal on the question of holding that the extended period of limitation was not applicable, do not arise in the present appeal, in view of the specific factual finding arrived at by the CESTAT.

The other substantial questions of law sought to be raised, as to whether the CESTAT was right in holding that the respondent was discharging sovereign function does not arise as the CESTAT has clearly refrained from giving its finding on that question. This is evident from reading of the contents of Paragraph Nos.23, 24 and 25 of the impugned order, whereat, the CESTAT had recorded that it has withheld ascertainment of the legality of the claim made by the respondent on the question of whether it was exercising sovereign functions under the SEBI Act and therefore, not liable to pay service tax.

Thus, no substantial question of law arises for our determination in the present appeal which is hereby dismissed.