TMI Blog2023 (8) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... sary ingredients for invoking the larger period of limitation contemplated under the proviso to section 73 (1) of the Finance Act, namely wilful suppression of facts with an intent to evade payment of service tax do not exist and, therefore, the extended period of limitation could not have been invoked. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It would transpire from the aforesaid decision that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this service. 3. The department conducted a verification of the records of the appellant for the period from April 2014 to June 2017 and issued a notice dated 20.02.2017 alleging that the appellant failed to deposit the service tax as a service recipient on import of the service. The appellant submitted a reply dated 11.04.2017 to the department and provided details of the facts stated by the appellant in the ST-3 returns for the period April 2014 to April 2017. The appellant pointed out that it was also providing output service to the Indian Institutes, for which it was required to pay service tax which it paid in time and the appellant also informed that it is for this reason it did not discharge the service tax liability on a reverse charge basis on the input service. The appellant also stated that from May 2017 it had started discharging service tax liability on a reverse charge basis on the input service and took credit while providing output service. 4. Subsequently on 26.07.2017 an audit was also conducted and the observations of the audit team were communicated to the appellant by a letter dated 26.07.2019. The issue that was raised was regarding non-payment of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of limitation and so the impugned order deserves to be set aside. 10. Shri S.K. Meena, learned authorized representative appearing for the department has, however, supported the impugned order and has contended that when the appellant had admittedly suppressed material facts in the ST-3 returns, the Adjudicating Authority and the Commissioner (Appeals) were justified in holding that the extended period of limitation had been correctly invoked. 11. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 12. It is not in dispute that the entire demand that has been confirmed by the Commissioner (Appeals) falls in the extended period of limitation. It has, therefore, to be seen whether the extended period of limitation could have been invoked in the facts and circumstances of the case. 13. To consider the issue, it would be appropriate to examine the allegations contained in the show cause notice. It mentions that non payment of service tax on the inputs service came to the notice of the department during the verification of the records and since the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment regime, hence, the onus of assessment of tax payable is on the assessee. They have failed to discharge this onus with willful intent to evade the payment of Service Tax. Further, it also appears that the assessee had intentionally and suppressed/concealed the facts of non-payment of Service Tax on import of Services under RCM and also failed to show their liability in ST-3 return with a willful intent to evade the payment of service tax and/or availment and utilization of Cenvat Credit. But for the audit conducted, the facts of improper availment and utilization of Cenvat credit/non-payment of Service Tax would not have come to the knowledge of the department. Thus, by not disclosing the entire vital facts to the department by them, it appears that the provisions of proviso to Section 73 (1) of the Finance Act, 1994 read with Rule 14 of CENVAT Credit Rules, 2004 are invokable and so the demand and recovery can be made for short/non-payment of service tax/non-reversal of the amount under Rule 6 of the CCR for extended period of five years from the relevant date . (emphasis supplied) 15. The Commissioner (Appeals), while examining this issue, observed that it was evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant had not discharged service tax liability on the input service on reverse charge basis only during the audit. Yet, the show cause notice was issued on 23.06.2020 i.e. almost after a period of three years and two months from the date the verification was conducted by the department. 17. The appellant may have suppressed information in the ST-3 returns filed by it regarding the liability to pay service tax on input service on reverse charge basis, though it had paid service tax while providing output service, but the department was aware of this fact on 11.04.2017. All that has been stated by Commissioner (Appeals) in the impugned order is that since it was evident that the appellant had not declared the liability on import of services under reverse charge in the ST-3 returns, this would amount to suppression of such import of services and if the verification of the records had not been conducted, non-payment of service tax could not have been detected. 18. There is no finding by the Commissioner (Appeals) that this fact had been suppressed by the appellant with an intent to evade payment of service tax. Suppression of a fact is not enough to invoke the extende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 21. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice. 22. The relevant date‟ has been defined in section 73 (6) of the Finance Act as follows; 73(6) For the purpose of this section, relevant date means,- (i) In the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made thereunder with intent to evade payment of duty by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant dated, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice. 26. In Pushpam Pharmaceuticals Company, the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since suppression of facts‟ has been used in the company of strong words such as fraud, col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that suppression of facts can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act. (emphasis supplied) 28. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme Court in the subsequent decision in Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur 2013 (288) E.L.T. 161 (SC) and the observation are: 18. We are in complete agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief. (emphasis supplied) 31. Very recently the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others W.P. (C) 7542 of 2018 decided on 06.04.2023, also observed as follows: 28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked. xxxxxxxxxxxxx 14. In this appeal, the case of the Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and is before us that it is entitled to the CENVAT credit. Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts. 16. Anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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