2018 (2) TMI 23 - DELHI HIGH COURT

Extended period of limitation - Penalty for non-compliance with the provisions of FA, 1994 - whether the Appellate Tribunal fell into error in holding that invocation of the extended period under proviso to Section 73(1) of the Act in respect of two services, i.e. management, maintenance and repair services and mandap keeper services is justified in the facts and circumstances of the case?

Held that: - it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word „suppression’ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. “fraud, collusion, wilful misstatement” - there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid paying excise duty. The terms „mis-statement’ and „suppression of facts’ are preceded by the expression „wilful’. The meaning which has to be ascribed is, deliberate action (or omission) and the presence of an intention. Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention.

In the present case, the revenue argues that appellant wilfully suppressed the value of taxable services and thus did not discharge its liability of paying the service tax on same. The contention of the appellant is that the appellant was under a bona fide belief that the appellant was not liable for payment of Service Tax for the Mandap Keeping and Management, Maintenance and Repair Services.

The Revenue has not been able to prove an intention on the part of the appellant to evade tax by suppression of material facts. In fact, it is clear that the appellant did not have any such intention and was acting under bona fide beliefs. For these reasons, it is held that the revenue cannot invoke the proviso to Section 73(1) of the Finance Act to extend the limitation period for issuing of SCN. The SCN was issued on 24.10.2008. The undischarged liability for payment of service tax with respect to Mandap Keeper Service and Management, Maintenance and repair services alleged in the SCN is for the period 2004-06 and 2005-08 respectively. Since the proviso to Section 73(1) cannot be invoked the SCN had to be served within one year from the relevant date. Therefore, the SCN with respect to short-payment of service tax for Mandap Keeper Service for the years 2004-2006 is barred by limitation. The SCN with respect to short- payment of service tax for Management, Maintenance and Repair Services for the years 2005-2007 is also barred by limitation.

The SCN for the year 2007-2008 is, however, not barred by the limitation period of one year and the assessee is liable to pay service tax on the same.

Appeal allowed - decided in favor of appellant.