TMI Blog2020 (12) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... as not justified in holding that the extended period of limitation was correctly invoked. The extended period of limitation could not have been invoked in the facts of the present case as facts were not suppressed by the appellant. In regard to the period from October, 2005 to March, 2006, the appellant had submitted working of ST-3 return in the reply to show cause notice, but it has been rejected by the Adjudicating Authority merely on the ground that the working was not supported by any document or a certificate from the Chartered Accountant. The Adjudicating Authority could have asked the appellant to supply the documents, if it was not satisfied with the explanation - The appellant has also stated that the computation of demand in the show cause notice is not correct. In this connection, reference has been made to the Notification dated September 10, 2004 that provides for abatement of 67%. Thus, service tax was effectively payable only on 33% of the gross value. 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 ₹ 1,58,24,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 ₹ 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 follows: S.No. Issues Period Demand 1. Advances of ₹ 8,88,75,470/- received prior to 10.09.2004 in respect of construction services rendered from 10.09.2004 Received prior to 10.09.2004 ₹ 90,65,298/- 2. Cenvat credit on invoices addressed to allegedly unregistered premises 23.02.2006 to 13.02.2007 ₹ 24,53,229/- (out of which ₹ 14,31,667/- utilized for payment of Service Tax) 3. Alleged sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Indl. Area, Phase-1, New Delhi 110020 for the year 2004-05 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the Construction Services became taxable i.e. 10.09.2004 and service 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to paragraph three of the audit report, it was pointed out that there was no short-payment of service tax amounting to ₹ 79,18,607/- and the calculation 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 ₹ 1,58,24,365/- as the treasury challan for ₹ 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 ₹ 1,48,92,943/- and not ₹ 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion upon the Noticee to pay service tax on self-assessment basis; and to file periodical returns. Had the officers of audit branch not conducted the audit, the non-payment of service tax would not have been unearthed . 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deliberate and with an intent to escape payment of duty. The observations are as follows; 4.Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944. 28. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I [ 2007 (216) ELT 177 (SC) ] also held: 10. The expression 'suppression has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not have been unearthed. 34. Learned Counsel for the appellant has placed the Circular dated April 23, 2009 issued by the Central Board of Excise and Custom regarding Return Scrutiny Manual for scrutiny of ST-3 returns. The relevant paragraph 2 of the Circular dealing with self-assessment is reproduced below: The self-assessment facility requires 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 scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary to examine the audit objection and the explanation offered by the appellant. 41. The first audit objection is regarding the advances received by the appellant prior to September 10, 2004 under construction services. According to the appellant, the demand of service tax on advances received prior to September 10, 2014 in respect of constructions services rendered from 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o supply the documents, if it was not satisfied with the explanation. 48. The appellant has also stated that the computation of demand in the show cause notice is not correct. In this connection, reference has been made to the Notification dated September 10, 2004 that provides for abatement of 67%. Thus, service tax was effectively payable only on 33% of the gross value. The calculation of service tax liability of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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