2024 (2) TMI 1134 - HC - Service Tax

Service tax liability calculation upheld without extended limitation period under Section 73(1) Finance Act 1994

The HC dismissed an appeal regarding service tax liability calculation. The court upheld CESTAT's order directing the Commissioner to calculate service ... Extended period of limitation - liability of a subcontractor to pay service tax - Validity of order of CESTAT for directing the Commissioner to calculate the service tax liability for the normal period prescribed under Section 73 (1) of the Finance Act, 1994 without invoking the proviso that seeks to extend the period of limitation - HELD THAT:- It is an undisputed fact that the question about levy of service tax by the sub-contractor was subjected to adjudication in the matter of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [2019 (6) TMI 518 - CESTAT NEW DELHI-LB], which was decided on 23-5-2019 by the larger Bench of the Tribunal, wherein the issue was set at rest that the sub-contractor was liable to pay service tax. Therefore, the said date in the facts of this case it was a doubtful issue as to who would be liable to pay the service tax. In the instant case the service tax was already deposited by the main contractor. The facts involved in this case that there was an interpretation issue about the liability. The Supreme Court in the matter of THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS AND ANOTHER VERSUS M/S RELIANCE INDUSTRIES LTD. AND COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S RELIANCE INDUSTRIES LTD. [2023 (7) TMI 196 - SUPREME COURT] while dealing with the issue of suppression of facts, observed that if the appellant was under a bona fide belief based upon certain judgment then in such case the said bona fide belief cannot be stated to be a suppression of fact and Court held We note that the issue of valuation involved in this particular matter is indeed one were two plausible views could co-exist. In such cases of cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determine his liability of duty correctly. This determination is required to be made on the basis of his own judgment and in a bona fide manner. Since the interpretational issue was disputed which was ultimately set at rest in 2019, it can very well be presumed that the same would not amount to suppression and the acts were bona fide whereby the proviso that seeks to extend the period of limitation under Section 73 of the Act can be pressed into motion. The order of the learned Tribunal remitting back to the Commissioner to calculate the service tax liability for the period prescribed under Section 73(1) of the Act without invoking the proviso that seeks to extend the period of limitation appears to be justified - no question of law arises for consideration - Appeal dismissed. Issues Involved:1. Applicability of the extended period of limitation under Section 73 of the Finance Act, 1994.2. Liability of a sub-contractor to pay service tax.3. Interpretation of suppression of facts in the context of service tax liability.Summary:1. Applicability of the extended period of limitation under Section 73 of the Finance Act, 1994:The Department appealed against the Tribunal's order remitting the case back to the Commissioner to recalculate the service tax liability without invoking the extended period of limitation under Section 73 of the Finance Act, 1994. The Department argued that the respondent's failure to disclose service tax payments constituted willful defiance, justifying the extended period of limitation. The respondent countered that the issue of sub-contractor liability was under adjudication and that the main contractor had already paid the service tax.2. Liability of a sub-contractor to pay service tax:The respondent, a sub-contractor, claimed that they did not pay service tax because the main contractors had already discharged the tax liability and provided certificates to that effect. The Tribunal had ordered the Commissioner to recalculate the service tax liability for the prescribed period without invoking the extended period of limitation. The respondent argued that paying the service tax would result in double taxation and that their non-payment was bona fide due to the ongoing adjudication of sub-contractor liability.3. Interpretation of suppression of facts in the context of service tax liability:The Court noted that the issue of sub-contractor liability was settled by a larger Bench of the Tribunal in 2019, indicating that the respondent's actions were based on a bona fide belief. The Supreme Court's rulings in similar cases emphasized that bona fide belief based on judicial interpretations cannot be equated with suppression of facts. The Court concluded that the respondent's non-disclosure did not amount to suppression with intent to evade tax, and thus the extended period of limitation under Section 73 could not be invoked.Conclusion:The Court found that the Tribunal's decision to remit the case back to the Commissioner for recalculating the service tax liability without invoking the extended period of limitation was justified. The appeal by the Department was dismissed, and no substantial question of law arose for consideration.