9911796707
TMI Blog2020 (12) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department that the appellant had received an advance of Rs. 8,88,75,470/- as on September 10, 2014 for construction service which became taxable with effect from September 9, 2004 for which the appellant should have deposited service tax of Rs. 90,65,298/-. The Department also entertained a view that the appellant had availed irregular CENVAT Credit during the period 2006-07, being the credit pertaining to unregistered premises. The Audit Team also observed that the appellant had short-paid service tax amounting to Rs. 79,18,607/- during the period from October 2005 to March 2006 and that of Rs. 1,58,24,365/- during the year 2006-07. The audit team also observed that during the period from 2004-05 to 2007-08, the appellant had deposited service tax after the expiry of the due date and thus, was liable to pay interest @ 13% per annum for the delayed period which came to the Rs. 16,45,973/-. The audit report is dated April 2, 2009, 3. A show cause notice dated October 22, 2009 was, therefore, issued to the appellant reiterating the observations made in the audit report and a demand was proposed. 4. It will be useful to reproduce the facts in a Tabular Form and they are as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer 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 him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words, one year' , the words "five years" had been substituted." 12. It would be pertinent to refer to that portion of the show cause notice dated October 22, 2009 that deals with the invocation of the extended period of limitation and it is reproduced below: "2. Whereas the audit of assessee i.e. M/s Gannon Dunkerley & Co. Ltd., B-228-229, Okhla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax for five years from the relevant date. It appears that the assessee has deliberately misdeclared and suppressed the facts with an intention to evade payment of due discharge of Service Tax liability. The assessee also appears to be liable for imposition of penalty under section 78 of the Act, ibid for their deliberate evasion of Service Tax." 13. It would be seen from the aforesaid show cause notice that the period involved is from 2004 upto March 2007. The audit report is dated April 2, 2009. The period within which the show cause notice can be served is 18 months from the relevant date. The show cause notice is dated October 22, 2009 and is, therefore, clearly beyond 18 months. The Department has relied upon the proviso to section 73(1) of the Finance Act, since under the proviso, the period of 18 months stands substituted by five years. 14. Learned counsel for the appellant has referred to the audit report dated April 2, 2009 to show that there can possibly be no mis-statement or suppression of facts, much less, willful statement or willful suppression of facts with an intent to evade payment of service tax and, therefore, the extended period contemplated under the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax became payable on the amount including cess, which was not deposited by us. It is denied that as on 10.09.2004, there was any liability to pay or deposit Service Tax on the advances received for the services to be provided. It is submitted that liability to pay tax on advances arose only after 16.06.2005 when the Finance Act, 2005 inserted Explanation 3 to Section 67 of the Act w.e.f. 16.06.2005 in the following words: The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provisions of such service. Prior to the said date no Service Tax was payable on advances received for the services to be provided. lt shall not be out of place to mention that the Company had deposited tax on advances standing as on 16.06.2005 and on the amount of advance adjusted towards payment for the work done between 10.09.2004 and 16.06.2005. 2 Contents of para 2 of the said notice has not been correctly stated. centralized registration on 23.02.2006 has totally escaped the attention of Audit team. The fact of applying for observation of the Audit team on based on the date of issue of centralized registration cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculation details was provided. 20. In regard to the paragraph four of the audit report, it was denied that there was short-payment of service tax amounting to Rs. 1,58,24,365/- as the treasury challan for Rs. 1,49,39,368/- were ignored by the audit team. It was also pointed out that the total amount should have been worked out to Rs. 1,48,92,943/- and not Rs. 1,58,24,365/-. 21. In regard to the paragraph five of the audit report, it was pointed out that the appellant had deposited the amount of interest. 22. The findings recorded by the Commissioner need to be reproduced and they are as follows: 25.1 Section 73 of the Act, as it stood during the period prior to 10.09.2004, has been substituted by Section 90 of the Finance (No. 2) Act, 2004 (23 of 2004), whereby the provisions of recovery of Service Tax have been made analogous to Section 11A of the Central Excise Act, 1944. Proviso clause of Sub-section (1) of this section inter alia contemplates, in respect of extended period, that where any service tax has not been levied or paid by reason of (a) fraud, or (b) collusion; or (c) willful mis-statement, or (d) suppression of facts; or (e) contravention of any of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nearthed. 29. The above examination of the statutory provisions clearly and unambiguously establishes the suppression of facts with intention to evade service tax with respect to the services provided by the Noticee. The intention to evade service tax is not required to be calculated on mathematical precision in the regime of self-assessment, especially when the assessment is made by the assessee himself. Therefore, it was the bounden duty of the Noticee to pay service tax and to file the statutory returns accordingly. The Noticee has not paid the service tax on the amount received by them on the account of services provided by them." (emphasis supplied) 23. It is seen that sub-section (1) of section 73 of the Act does not mention that suppression of facts has to be "wilful' since "wilful' precedes only mis-statement. It has, therefore, to be examined whether even in the absence of the expression "wilful" before "suppression of facts", suppression of facts have still to be wilful with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has also to be "wilful' with an intent to evade payment of service tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. 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." (emphasis supplied) 26. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct." 29. The Delhi High Court in Bharat Hotels Limited also examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Act and held as follows; "27. Therefore, 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires a strong compliance verification system which in turn necessitates an effective return scrutiny mechanism. The RSMST proposes to bifurcate the scrutiny into two parts, preliminary scrutiny and detailed scrutiny. While the preliminary scrutiny would cover all the returns and could be done even online, detailed scrutiny would cover selected returns, identified on the basis of risk parameters, developed from the information furnished in the return submitted by the taxpayers." 35. A perusal of paragraph 2 of the Circular indicates that the self-assessment facility requires a strong compliance verification system, which intern necessitate an effective scrutiny mechanism. The scrutiny can be divided in two parts namely primary scrutiny and a detailed scrutiny. The primary scrutiny covers all the return, while a detailed scrutiny covers selected returns, identified on the basis of risk parameters, developed from the information furnished in the returns submitted by the tax-payers. 36. It has, therefore, been submitted by the learned counsel for the appellant that since the appellant had been regularly filing returns, an obligation was cast upon the officers, at least in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om September 10, 2004 were exempt from payment of service tax, in terms of the Notification dated September 10, 2004. The said Notification is reproduced below: "Service tax on new service- Exemption to part of services received prior to 10-9-2004 In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts that portion of the value of taxable services which are defined in sub-clause zzm, zzn, zzo, zzq, zzr, zzs, zzt, zzu, zzv, zzw, zzx and zzy of clause 105 of section 65 of the said Act, from the whole of service tax leviable thereon under section 66 of the said Act, which is received by the service provider from the customer, exhibitor, client or any person, as the case may be, prior to the 10th day of September, 2004." 42. In view of the aforesaid Notification, the advances received by the appellant prior to September 10, 2004 are clearly exempted from payment of service tax. 43. The second audit objection is regarding irregular availment of CENVAT credit since the appellant had availed credit on the basis of invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, based on figures considered in the show cause notice would, according to the appellant, be as under: particulars Figures shown in return (in Rs.) Gross taxable value 115,60,58,043/- Less: abatement(67%) 77,45,58,889/- Taxable value (33%) 38,14,99,154/- Service Tax payable (including cess) @ 10.20% 3,89,12,914/- Service Tax paid (including cess) 8,31,21,023/- Service Tax excess-paid (including cess) 4,42,08,109/- 49. The explanation offered by the Appellant is plausible. 50. Further, in regard to the period from April, 2006 to March, 2007, the contention of the appellant is that the show cause notice has not explained as to how there was an alleged short-payment of Rs. 1,58,24,365/- during the aforesaid period. According to the appellant, the impugned order has confirmed the demand of Rs. 1,58,24,365/- without considering the TR-6 challans submitted by the appellant in the reply to the show cause notice. The challans have been enclosed with the Appeal. 51. It cannot, therefore, be said that the appellant had any intention, much less willful intention not to pay service tax in regard to the four audit objections referred to the Audit Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
