Extended limitation and Section 78 penalty fail where no suppression or deliberate contravention is established.

Extended limitation under the proviso to Section 73(1) of the Finance Act, 1994 was held unavailable where the assessee had obtained registration, began compliance on advice from the service recipient, did not charge or collect tax for the earlier period, and had received no prior departmental intimation of liability. On those facts, suppression, misstatement, or deliberate contravention was not established. Because the ingredients for extended limitation were absent, penalty under Section 78 also could not stand, and consequential relief followed.

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Issues: Whether the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was invocable and whether penalty under Section 78 of the Finance Act, 1994 was sustainable.

Analysis: The appellant had obtained registration and started compliance once advised by the service receiver. The tax for the earlier period had not been charged in the bills or collected from the service receiver, and there was no prior departmental intimation about liability. On these facts, the record did not establish suppression, misstatement, or any deliberate contravention to justify invocation of the extended period. Since the ingredients required for extended limitation were absent, the foundation for penalty under Section 78 also failed.

Conclusion: The extended period of limitation was not available to the Revenue and penalty under Section 78 was not justified. The appeal was allowed with consequential relief.

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