2023 (8) TMI 1384 - AT - Service Tax

Service recipient wins appeal as extended limitation requires proven intent to evade service tax under section 73(1)

M/s Digital Infusion Private Limited Versus Commissioner, CGST, New Delhi.

The CESTAT NEW DELHI held that the extended period of limitation under section 73(1) of the Finance Act cannot be invoked without establishing wilful ... Invocation of Extended Period of Limitation - failure to deposit the service tax as a service recipient on import of the service - suppression of facts - intent to evade tax - HELD THAT:- 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 extended period of limitation, for there has also to be an intent to evade of payment of service tax. Though the Commissioner (Appeals) has referred to the verification carried out on 11.04.2017, but the Commissioner (Appeals) completely failed to appreciate that if this was the position, then the department could have issued the show cause notice promptly soon after 11.04.2017 and there was no necessity at all to wait till 23.06.2020 to issue the show cause notice. The contention of the learned counsel for the appellant is that the necessary 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 payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax. In the present case, the Commissioner (Appeals) did not even record a finding that the appellant had any intention to evade payment of service tax since all that has been recorded in the impugned order by the Commissioner (Appeals) is that the appellant did not disclose the correct facts in the service tax returns. In the absence of such a finding, which is absolutely necessary, the extended period of limitation could not have been invoked - The Tribunal in M/S GD GOENKA PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX, DELHI SOUTH [2023 (8) TMI 995 - CESTAT NEW DELHI] had clearly held that self assessment cannot be a ground to invoke the extended period of limitation in the absence of the ingredients contemplated under the proviso to section 73 (1) of the Finance Act. The entire demand confirmed by the Commissioner (Appeals) falls in the extended period of limitation. The impugned order dated 25.08.2021 passed by the Commissioner (Appeals), therefore, deserves to be set aside and is set aside - Appeal allowed. Issues Involved:1. Non-payment of service tax on input services under the reverse charge mechanism.2. Invocation of the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994.Summary:Issue 1: Non-payment of service tax on input services under the reverse charge mechanism.The appellant, M/s Digital Infusion Private Limited, provided Internet Telecommunication services and sold space for advertisements, which became taxable from 01.10.2014. The appellant was required to discharge the service tax liability under the reverse charge mechanism on the import of this service. The department conducted a verification of records for the period from April 2014 to June 2017 and issued a notice alleging that the appellant failed to deposit the service tax as a service recipient on the import of the service. The appellant contended that it was providing output services to Indian Institutes and paid service tax timely, thus did not discharge the service tax liability on a reverse charge basis for input services. From May 2017, the appellant started discharging service tax liability on a reverse charge basis and took credit while providing output services.Issue 2: Invocation of the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994.The department issued a show cause notice on 23.06.2020, invoking the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994, alleging suppression of facts with willful intent to evade payment of service tax. The appellant argued that the extended period could not be invoked as the facts were disclosed during the verification of records on 11.04.2017, and there was no intent to evade payment of service tax. The Adjudicating Authority and Commissioner (Appeals) confirmed the demand, stating that the appellant suppressed facts in the ST-3 returns.The Tribunal examined whether the extended period of limitation could be invoked. It referred to the Supreme Court and Delhi High Court judgments, which held that suppression of facts must be willful and with intent to evade payment of service tax. The Tribunal found no evidence of intent to evade payment of service tax by the appellant. The department was aware of the non-payment of service tax on 11.04.2017, yet issued the show cause notice only on 23.06.2020. The Tribunal concluded that mere non-disclosure in the service tax returns does not imply intent to evade payment of service tax.Conclusion:The Tribunal set aside the impugned order dated 25.08.2021 passed by the Commissioner (Appeals) and allowed the appeal, stating that the extended period of limitation could not be invoked in the absence of intent to evade payment of service tax. The entire demand confirmed by the Commissioner (Appeals) fell within the extended period of limitation, which was not justified.