Extended limitation for service tax needs proof of wilful suppression; penalty failed where tax was paid after intimation.

Extended limitation in service tax proceedings requires proof of wilful suppression or deliberate intent to evade tax; mere non-payment or delayed payment is insufficient. A fully State-owned company with service tax registration paid the disputed tax after departmental intimation, and no material beyond bare allegations showed conscious withholding of facts. On that basis, invocation of the extended period was unsustainable and the penalty could not be sustained, while the admitted tax liability itself remained undisturbed.

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Issues: Whether the show cause notice could validly invoke the extended period of limitation on the allegation of suppression with intent to evade service tax, and whether penalty was sustainable.

Analysis: The appellant was a fully State-owned company and had service tax registration. The disputed service tax on guarantee fee was admittedly paid after the departmental letter brought the liability to notice. For invoking the extended period, the relevant test is not mere non-payment, but wilful suppression or conscious withholding of facts with intent to evade tax. The burden to establish such ingredients lay on the Revenue. In the absence of material beyond bare allegations, and in view of the prompt payment made after intimation, the ingredients for invoking the extended period were not made out. The departmental circular and the statutory scheme under section 73 also supported the view that voluntary payment after notice negatived the penal element.

Conclusion: The invocation of the extended period was unsustainable and the penalty could not be sustained. The finding of suppression was therefore set aside in so far as it formed the basis for penalty, while the admitted tax liability remained undisturbed.

Final Conclusion: The appeal succeeded only to the extent of deletion of penalty and the impugned order was otherwise maintained.

Ratio Decidendi: Extended limitation and penalty in service tax matters require proof of wilful suppression or deliberate intent to evade tax, and mere non-payment or delayed payment, without such proof, is insufficient.

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