9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 1368 - AT - Service TaxValidity of show cause notice issued beyond the period stipulated in the proviso to section 73(1) of the Finance Act 1994 the Finance Act - suppression of facts with an intent to evade payment of service tax - Extension of period of limitation - service tax proposed under the three heads namely rent-a-cab service renting of immovable property and luggage booking under business support service - HELD THAT - In the present case as noticed all that has been stated in paragraphs 9 and 12 of the show cause notice is that the appellant received an amount for the period 2008-09 to 2011-12 for the three taxable services and since the appellant did not provide the required documents it suppressed facts from the department with intent to evade payment of service tax. Though the appellant specifically denied that any facts had been suppressed much less with an intention to evade payment of service tax the Joint Commissioner merely observed that the fact of providing taxable service would not have come to the notice of the department had investigation not been initiated by the department and it is for this reason that the Joint Commissioner held that the appellant had willfully suppressed material facts from the department with intent to evade payment of service tax. The Commissioner (Appeals) held that there was no infirmity with the issue of demand as the period of demand was within five years. It cannot be alleged by the department that facts were not in the knowledge of the department since earlier also a show cause notice dated 01.10.2009 had been issued by the department to the appellant for the period from 2004-05 to March 2008 proposing demand under the same heads as in the present appeal. There is therefore no reason as to why the show cause notice should have been issued beyond the normal period of limitation for the period from April 2012 to March 2013 nor there is any justification for issuing the show cause notice dated 22.10.2014 for the subsequent period from April 2013 to March 2014. It is therefore clearly a case where the facts were in the knowledge of the department and the department cannot allege that facts had been suppressed. In any case even if it is assumed that facts were suppressed by the appellant then too no reason has been assigned in the orders passed by the Joint Commissioner or the Commissioner (Appeals) that such suppression was with an intent to evade payment of service tax. This apart service tax has been demanded on the basis of profit and loss account and balance sheet which are public documents which the department could have ascertained. The issue involved in this appeal also relates to interpretation of law. The decisions referred to above have clearly held that in such circumstances there can be no suppression of facts with an intent to evade payment of service tax. The impugned orders dated 16.11.2016 and 17.08.2017 passed by the Commissioner (Appeals) therefore deserve to be set aside on the sole ground that the extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act could not have been invoked in the facts and circumstances of the case. The orders dated 16.11.2016 and 17.08.2017 passed by the Commissioner (Appeals) are therefore set aside and the two appeals are allowed with consequential relief(s) if any to the appellant.
The core legal questions considered in this judgment are:
1. Whether the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994, could be invoked for issuing show cause notices for service tax demands for the periods April 2008 to March 2012 and April 2012 to March 2013. 2. Whether there was suppression of facts by the appellant with a deliberate intent to evade payment of service tax, justifying invocation of the extended limitation period. 3. The applicability and interpretation of "suppression of facts" under section 73(1) proviso and relevant judicial precedents, including the requirement of willful intent and mens rea for invoking extended limitation. 4. The effect of prior knowledge of facts by the department, including issuance of earlier show cause notices, on the limitation period for subsequent demands. 5. The legal consequences of self-assessment by an assessee and whether mere differences in opinion on tax liability or non-disclosure amount to suppression with intent to evade tax. Issue-wise Detailed Analysis 1. Invocation of Extended Limitation Period under Section 73(1) of the Finance Act The legal framework is section 73(1) of the Finance Act, which prescribes a one-year limitation period for issuing show cause notices for service tax demands but extends it to five years if the failure to pay tax arises from fraud, collusion, wilful misstatement, suppression of facts, or contravention of provisions with intent to evade tax. The Court examined the show cause notices issued for the periods April 2008 to March 2012 and April 2012 to March 2013. The appellant contended that since an earlier show cause notice dated 01.10.2009 was issued for the period 2004-05 to March 2008 covering the same heads of service, the department had knowledge of all facts, and thus the extended limitation could not be invoked for the subsequent periods. The authorities below held that the extended limitation was correctly invoked, relying on the allegation of suppression of facts and the Supreme Court's ruling that a show cause notice issued within five years from the date of knowledge is valid. However, the Court scrutinized whether the facts justified such invocation. 2. Meaning and Requirement of Suppression of Facts with Intent to Evade Tax The Court extensively analyzed judicial precedents interpreting "suppression of facts" under analogous provisions in excise law (section 11A of the Central Excise Act, 1944) which is pari materia to section 73(1) of the Finance Act. Key precedents include:
The Court concluded that suppression of facts under section 73(1) must be deliberate and with intent to evade tax, and mere non-disclosure or difference of opinion is insufficient. 3. Effect of Prior Knowledge and Earlier Show Cause Notices The department had issued a show cause notice in 2009 for the period 2004-05 to March 2008 under the same service categories. This indicated that the department was aware of the appellant's activities during that period. The Court held that this prior knowledge negated the department's claim of suppression for the subsequent periods (2008-2012 and 2012-2013) as the facts were already known. Therefore, the extended limitation period could not be invoked for these later periods since there was no fresh suppression or concealment of facts unknown to the department. 4. Self-Assessment and Difference of Opinion on Tax Liability The Court examined the legal position on self-assessment, noting that every assessee operates under self-assessment and is required to pay tax and file returns accordingly. Key observations include:
5. Application of Law to Facts and Treatment of Competing Arguments The appellant denied any suppression or intent to evade tax, contending that the department was aware of all facts and that the show cause notices were time-barred. The department argued that the appellant had willfully suppressed facts, citing non-cooperation and failure to submit documents. The Court found that the show cause notices did not specify any concrete instance of suppression with intent to evade tax. The department relied on the investigation initiated and the appellant's non-submission of documents, but no evidence demonstrated deliberate concealment or fraudulent intent. The Court noted that the demand was based on profit and loss accounts and balance sheets, which are public documents accessible to the department, further weakening the claim of suppression. Given the prior show cause notice and knowledge of facts by the department, the Court held that the extended limitation period was wrongly invoked. 6. Conclusions The Court concluded that the extended period of limitation under the proviso to section 73(1) of the Finance Act could not be invoked in the facts and circumstances of the case. The appellant's conduct did not amount to suppression of facts with intent to evade payment of service tax. The show cause notices issued beyond the normal one-year limitation period were therefore barred by limitation. Significant Holdings "Mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked." "Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." "Difference of opinion between the department and an assessee does not amount to suppression with intent to evade tax." "The department cannot invoke extended limitation merely because the assessee operates under self-assessment; the burden is on the department to prove suppression with intent." "The extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act could not have been invoked in the facts and circumstances of the case." Accordingly, the orders confirming service tax demands with interest and penalty were set aside on the ground of limitation, and the appeals were allowed with consequential relief.
|
