2024 (10) TMI 150 - AT - Service Tax

Appropriation of Rs. 11 lakh deposited under protest towards time-barred claim unjustified, no wilful suppression found

Vigasa Industries Private Limited Versus The Commissioner of Service Tax, Audit-1, Delhi And Commissioner of Service Tax, Delhi-I Versus M/s. Vigasa Industries Private Limited

CESTAT NEW DELHI held that appropriation of Rs. 11,00,000 deposited under protest towards a time-barred claim was unjustified, as payments made under ... Appropriation of Rs. 11,00,000/- deposited under protest - invocation of extended period of limitation - whether the amount of Rs. 11,00,000/- deposited by the appellant under protest during investigation could have been appropriated by the Commissioner in the impugned order for the period covered by the extended period of limitation, which demand was dropped by the Commissioner for the reason that the extended period of limitation could not have been invoked? - HELD THAT:- In Federation of Andhra Pradesh Chamber of Commerce and Industry [2017 (5) TMI 1199 - CESTAT HYDERABAD], the Tribunal held that any payment made under protest cannot be considered as acceptance of the liability - the appropriation of an amount of Rs. 11,00,000/- towards a time barred claim is not justified. Whether the extended period of limitation could have been invoked in the facts of circumstances of the case? - HELD THAT:- It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be “wilful’ since “wilful’ precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression “wilful” before “suppression of facts” under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be “wilful’ and there should also be an intent to evade payment of service tax. 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 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, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The burden of proving that the appellant had suppressed facts with an intent to evade payment of service tax was clearly upon the department. It was necessary for the department to illustrate any positive act on the part of the appellant. The investigation started in October 2012 and continued for a period of almost two years. The entire records, including the balance sheets were available with the department and no new facts came to the notice of the department when the show cause notice was issued on 22.04.2014. The department has failed to substantiate that the appellant suppressed material facts with an intention to evade payment of service tax. There is no error in the order passed by the Commissioner holding that the extended period of limitation could not have been invoked in the facts and circumstances of the case. Appeal filed by the department against that part of the order passed by the Commissioner that holds that the extended period of limitation under the first proviso to section 73(1) of the Finance Act could not have been invoked is dismissed. Issues Involved:1. Appropriation of Rs. 11,00,000/- deposited under protest.2. Invocation of the extended period of limitation under the proviso to section 73(1) of the Finance Act.Issue-Wise Detailed Analysis:1. Appropriation of Rs. 11,00,000/- Deposited Under Protest:The appellant contested the appropriation of Rs. 11,00,000/- deposited under protest during the investigation for a period covered by the extended period of limitation, which was dropped by the Commissioner. The appellant's counsel argued that the amount could not be appropriated towards a time-barred claim, relying on precedents like A.S. Abdul Khader vs. Commissioner of C. Ex., Cus. & S.T., Hyderabad-II, which clarified that payment under protest does not equate to acceptance of liability. The Tribunal in A.S. Abdul Khader emphasized that a time-barred demand is invalidated due to the expiration of the time limit for raising the demand. It was held that the appellant could claim a refund of the amount paid if the demand is set aside as time-barred.In Federation of Andhra Pradesh Chamber of Commerce and Industry vs. C.C.E., Cus. & S.T., Hyderabad-II, the Tribunal held that any payment made under protest cannot be considered as acceptance of liability. Therefore, the appropriation of Rs. 11,00,000/- towards a time-barred claim was deemed unjustified.2. Invocation of the Extended Period of Limitation:The department's appeal challenged the dropping of the demand for the extended period of limitation. The Commissioner, in the impugned order, noted that the investigation initiated in October 2012 continued for about two years, and the demand was issued based on available records without any new facts coming to light. The Commissioner found that non-furnishing of information is not a ground for invoking the extended period of limitation. The extended period could not be invoked as the facts were already in the department's knowledge in 2012, but no show cause notice was issued until April 2014.Section 73(1) of the Finance Act stipulates an eighteen-month period for serving a notice for non-levied or short-paid service tax. The proviso extends this period to five years in cases involving fraud, collusion, wilful misstatement, or suppression of facts with intent to evade tax. The Supreme Court in Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay, and Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise, held that suppression of facts must be deliberate and with intent to evade payment of duty. The burden of proving such intent lies on the department.The department failed to demonstrate that the appellant suppressed facts with intent to evade service tax. The Commissioner correctly held that the extended period of limitation could not be invoked, as the department did not substantiate any positive act of suppression by the appellant.Conclusion:- Service Tax Appeal No. 50010 of 2017 filed by the appellant is allowed to the extent that the appropriation of Rs. 11,00,000/- towards a time-barred claim is set aside.- Service Tax Appeal No. 50235 of 2017 filed by the department is dismissed, upholding the Commissioner's decision that the extended period of limitation could not be invoked.(Order Pronounced on 01.10.2024)