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

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 protest cannot be considered acceptance of liability. The Tribunal dismissed the department's appeal regarding invocation of extended limitation period, finding no wilful suppression of facts with intent to evade service tax. The department failed to prove deliberate suppression despite having access to all records during the two-year investigation period from October 2012.

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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)

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