2025 (6) TMI 594 - AT - Service Tax

Invocation of extended period of limitation - Short payment of Service Tax - Erection Commission or Installation Service - denial of benefit of N/N. 1/2006-ST dated 01.03.2006 - HELD THAT - Admittedly the appellant is registered with the Service Tax department and paying Service Tax and filing their ST3 returns in time claiming the benefit of Notification No. 1/2006-ST dated 01.03.2006. In that circumstances the Show Cause Notice issued on 18.07.2011 for the period 01.03.2006 to 31.03.2010 is barred by limitation. The same view was taken by this Tribunal in the case of Arya Logistics 2023 (8) TMI 853 - CESTAT AHMEDABAD wherein this Tribunal observed that The appellant have maintained proper books of account in the normal course of business. It is pertinent to note that the entire case of the department on merit is that since appellant have availed Cenvat Credit they violated the condition of abatement Notification No. 1/2006-ST. As discussed above the facts that availment of Cenvat Credit and payment of Service Tax on the abated value were declared in the ST-3 return. Hence having all the facts were disclosed to the department nothing prevented department from issue of show cause notice within normal period of one year. Therefore the demand raised in the show cause notice is clearly time barred. As appellant has admitted certain demand amounting to Rs. 4, 19, 734/-the same is appropriated from the amount already paid by the appellant amounting to Rs. 7, 00, 000/-. In the facts and circumstances of the case no penalty is imposable on the appellant. Conclusion - i) The SCN issued invoking extended limitation period was barred by limitation and set aside. ii) Demand for short payment admitted by appellant was accepted and adjusted. iii) No penalty was imposed on the appellant. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the Show Cause Notice (SCN) issued invoking the extended period of limitation under service tax law is valid and sustainable, given that the appellant was registered, regularly filing returns, and paying service tax during the relevant period;
• Whether the extended period of limitation can be invoked when there is no suppression of facts or fraud on the part of the appellant;
• Whether the demand for short payment of service tax, along with interest and penalty, can be upheld when the SCN is issued beyond the normal limitation period;
• Whether penalty is imposable on the appellant in the facts and circumstances of the case;
• Determination of the quantum of admitted service tax liability and its appropriate adjustment against amounts paid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of invoking extended period of limitation for issuance of Show Cause Notice

Relevant legal framework and precedents: The limitation period for issuing a SCN for service tax demand is generally one year from the relevant date under Section 73(1) of the Finance Act, 1994. The extended period of limitation, up to five years, can be invoked only in cases where there is willful suppression of facts or fraud by the assessee. Notification No. 1/2006-ST dated 01.03.2006 provides abatement of service tax on certain services, and the appellant was availing benefit under this notification.

The Tribunal relied heavily on the decision in Arya Logistics (supra), where it was held that if the assessee is registered, regularly filing returns disclosing all relevant facts including availment of Cenvat Credit and payment of service tax, and there is no suppression or fraud, the extended period of limitation cannot be invoked. The Tribunal in Arya Logistics emphasized that the Revenue's knowledge of the facts through returns precludes the use of extended limitation.

Court's interpretation and reasoning: The Tribunal noted that the appellant was registered under the service category, regularly filing ST-3 returns and paying service tax on the abated value as per Notification No. 1/2006-ST. The appellant disclosed all relevant details in the returns, including the value on which service tax was paid and the availment of Cenvat Credit.

Given this transparency and absence of concealment, the Tribunal held that the extended period of limitation cannot be invoked. The SCN issued on 18.07.2011 for the period 01.03.2006 to 31.03.2010 was therefore barred by limitation. The Tribunal expressly followed the reasoning in Arya Logistics, which held that where facts are disclosed and returns filed regularly, the normal one-year limitation applies and the extended period is not available.

Key evidence and findings: The appellant's consistent filing of ST-3 returns, registration under the relevant service category, and payment of service tax on the abated value were key facts. The Revenue had knowledge of these facts through the returns. The absence of suppression or fraud was a critical finding.

Application of law to facts: Since the appellant complied with all filing and payment requirements, and no concealment was established, the extended limitation period could not be invoked. The SCN issued beyond the normal limitation period was thus invalid.

Treatment of competing arguments: The Revenue contended for the validity of the demand and extended limitation. The appellant argued that the SCN was time barred due to regular compliance and disclosure. The Tribunal accepted the appellant's argument based on the precedent and facts.

Conclusion: The SCN issued invoking extended limitation period was barred by limitation and therefore invalid.

Issue 2: Sustainment of demand for short payment of service tax, interest, and penalty

Relevant legal framework and precedents: Under service tax law, demand for short payment must be made within the limitation period. Penalty is imposable if there is willful evasion or suppression. Interest is payable on confirmed demand.

Court's interpretation and reasoning: Since the SCN was barred by limitation, the demand for Rs. 49,15,187/- and Rs. 1,35,628/- could not be sustained. However, the appellant admitted a short payment of Rs. 4,19,734/-, which was appropriated against the amount already paid by the appellant.

Key evidence and findings: Admission by the appellant of a certain amount of short payment, and the amount already paid by the appellant.

Application of law to facts: The admitted amount was adjusted from the amount paid. Since the larger demand was time barred, it was set aside.

Treatment of competing arguments: The appellant accepted partial liability, while contesting the larger demand. The Tribunal accepted the admitted liability and rejected the rest on limitation grounds.

Conclusion: Demand for admitted amount is appropriate and adjusted; rest of the demand is set aside.

Issue 3: Imposability of penalty

Relevant legal framework and precedents: Penalty under service tax law is generally imposed for willful evasion or suppression of facts.

Court's interpretation and reasoning: Given the appellant's compliance in registration, timely filing of returns, and disclosure of facts, the Tribunal found no basis for penalty. The absence of suppression or fraud negates penalty imposition.

Key evidence and findings: Regular filing of returns, disclosure of facts, admission of partial liability, and no concealment.

Application of law to facts: No penalty was imposed as appellant's conduct did not warrant it.

Treatment of competing arguments: Revenue sought penalty; appellant denied basis. Tribunal sided with appellant.

Conclusion: No penalty is imposable on the appellant.

3. SIGNIFICANT HOLDINGS

"Admittedly the appellant is registered with the Service Tax department and paying Service Tax and filing their ST3 returns in time claiming the benefit of Notification No. 1/2006-ST dated 01.03.2006. In that circumstances the Show Cause Notice issued on 18.07.2011 for the period 01.03.2006 to 31.03.2010 is barred by limitation."

"Having all the facts were disclosed to the department, nothing prevented department from issue of show cause notice within normal period of one year. Therefore, the demand raised in the show cause notice is clearly time barred."

"As appellant has admitted certain demand amounting to Rs. 4,19,734/-the same is appropriated from the amount already paid by the appellant amounting to Rs. 7,00,000/-. In the facts and circumstances of the case no penalty is imposable on the appellant."

Core principles established:

• The extended period of limitation for issuance of SCN is invokable only in cases of willful suppression or fraud;
• Regular registration, timely filing of returns, and disclosure of facts preclude invocation of extended limitation;
• Demand raised beyond the normal limitation period in absence of suppression is time barred and unsustainable;
• Penalty is not imposable where there is no willful evasion or suppression;
• Partial admitted liability can be adjusted against amounts paid.

Final determinations:

• The SCN issued invoking extended limitation period was barred by limitation and set aside;
• Demand for short payment admitted by appellant was accepted and adjusted;
• No penalty was imposed on the appellant;
• The appeal was disposed of accordingly.