Court denies extended service tax recovery, no evasion intent. Cross-objection dismissed, no new legal question.

The Court held that the extended period for service tax recovery was correctly disallowed as there was no deliberate intent to evade tax by the respondent, a government undertaking. The Court also found the cross-objection maintainable under Section 35G(9) but dismissed it on merits as no new substantial question of law was presented regarding the liability to pay service tax. Both the Revenue's appeal and the respondent's cross-objection were dismissed, affirming the CESTAT's decisions.

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Issues Involved:

1. Whether the CESTAT was correct in holding that the extended period cannot be invoked as stipulated in the proviso to Section 73 of the Finance Act, 1994.
2. Whether the cross-objection filed by the respondent is maintainable by virtue of Section 35G(9) of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Extended Period Invocation under Section 73:

The Revenue's appeal questioned the CESTAT's decision to disallow the extended period for service tax recovery under Section 73 of the Finance Act, 1994. The respondent, Chhattisgarh State Industrial Development Corporation Limited (CSIDC), did not register under Section 65 of the Act and failed to pay service tax despite collecting charges from lessees. The Revenue argued this was a case of wilful default justifying the extended period.

The respondent countered, asserting there was no wilful suppression or intent to evade tax, citing their status as a government undertaking and a bona fide belief of exemption based on a circular by the Central Board of Excise and Customs (Circular No.89/7/2006-ST). The Revenue referred to another circular (No.192/02/2016-Service Tax) clarifying that services provided by the government or local authorities against consideration are taxable.

The Court referenced the Supreme Court's rulings in Uniworth Textiles Ltd. v CCE, Raipur and Anand Nishikawa Co. Ltd. v Commissioner of Central Excise, Meerut, emphasizing that mere non-payment or inadvertent non-compliance does not equate to wilful suppression or mis-statement. The burden of proof lies with the Revenue to establish wilful mis-statement.

Given CSIDC's government affiliation and reasonable explanation for non-compliance, the Court concluded there was no deliberate intent to evade tax. Thus, the CESTAT correctly disallowed the extended period invocation. The first substantial question of law was answered against the Revenue.

2. Maintainability of Cross-Objection under Section 35G(9):

The respondent's cross-objection's maintainability was examined under Section 35G(9) of the Central Excise Act, 1944, which applies the Code of Civil Procedure (CPC) provisions to appeals. Consequently, Order 41 Rule 22 of the CPC, allowing respondents to support the judgment on any ground decided against them, was applicable.

The Supreme Court's decision in Bhanu Kumar Shastri v Mohanlal Sukhadia and Others affirmed that respondents could challenge adverse findings without filing a separate appeal, supporting the cross-objection's maintainability.

However, the respondent's counsel failed to present any new substantial question of law regarding their liability to pay service tax. The Court reiterated that the services provided by CSIDC were taxable, referencing the relevant circulars and previous findings.

Thus, while the cross-objection was deemed maintainable, it did not affect the merits of the case. The second substantial question of law was answered in favor of the respondent, but the cross-appeal/cross-objection failed on merits.

Conclusion:

Both the Revenue's appeal and the respondent's cross-appeal/cross-objection were dismissed on merits. The CESTAT's decision to disallow the extended period for service tax recovery and the maintainability of the cross-objection were upheld.

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