2025 (2) TMI 896 - AT - Service Tax

Appellant wins remand in service tax case challenging extended limitation period under section 73

MX Systems International Private Limited Versus Commissioner of GST& Central Excise, Mumbai East

CESTAT Mumbai allowed the appeal by remand in a service tax matter involving discrepancies in turnover reporting for FY 2015-16. The appellant challenged ... Invocation of extended period of limitation - appellant's turnover of services for the financial year 2015-16 was accurately reported or not - HELD THAT:- The plea is that settled law, in re Dinesh Chandra R Agarwal [2023 (11) TMI 1080 - CESTAT AHMEDABAD] and in re GD Goenka Pvt Ltd [2023 (8) TMI 995 - CESTAT NEW DELHI] that were adjudicated in identical or in near identical circumstances, precludes resort to extended period of limitation under section 73 of Finance Act, 1994 merely from such discrepancy. At this stage, it is not required to examine the applicability of these two decisions as the adjudicating authority has correctly pointed out that no steps were taken by appellant to rectify the statutory filings, which, according to their submissions in response to the show cause notice, was genesis of the dispute. While neither adjudicating authority nor the Tribunal is concerned with the correctness of the records filed before other tax authorities, the inferences that may be drawn from the two records, neither of which were defended except by furnishing of details of sale of goods either independently or along with the services that is beyond the purview of Finance Act, 1994, is the foundation for rectification of one of the returns on the one hand or deficiency in one or the other on the other hand. Empowerment to invoke section 73 of Finance Act, 1994 extends from the obligation in section 70, read with section 68, of Finance Act, 1994 and not much different from the scope of normal assessment under section 72 of Finance Act, 1994 which enables obtaining of additional documents and evidence for re-determination of sum payable by an assessee. Conclusion - It was incumbent upon the adjudicating authority to examine the details of the goods said to have been supplied either by way of sale or in the course of supply of service, that constitutes ‘trading’ and, thereby, excluded from the purview of taxability in Finance Act, 1994. Failure to undertake such exercise affects the credibility of the impugned order warranting remand back to the original authority for a fresh decision after taking note of the documents evidencing supply of goods which are not liable to be included in the value of taxable service for the disputed period. Appeal allowed by way of remand. The issues presented and considered in the legal judgment are as follows:1. Whether the appellant's turnover of services for the financial year 2015-16 was accurately reported.2. Whether the adjudicating authority's decision to confirm the demand for tax on the differential turnover and impose penalties was justified.3. Whether the appellant's explanation regarding the error in the income tax return and the reconciliation of statutory records was sufficient to rebut the tax demand.4. Whether the extended period of limitation under section 73 of the Finance Act, 1994 could be invoked based on the discrepancy in statutory filings.The detailed analysis of the issues is as follows:Issue 1:The relevant legal framework and precedents include section 66D(e) of the Finance Act, 1994, which allows for the deduction of the value of goods supplied along with services. The Court interpreted the appellant's failure to rectify the error in the income tax return as a basis for the tax demand. Key evidence included the discrepancy between the turnover reported in the income tax return and the service tax return. The Court applied the law to the facts by examining the statutory documents and the submissions made by the appellant. Competing arguments centered around the appellant's contention that the error was inadvertent and could have been rectified. The Court concluded that the appellant failed to substantiate the difference in turnover and upheld the tax liability.Issue 2:The legal framework for this issue involved the application of penalties under sections 77 and 78 of the Finance Act, 1994. The Court reasoned that the adjudicating authority correctly confirmed the demand and imposed penalties based on the appellant's failure to rectify the statutory filings. The key evidence was the order-in-original confirming the demand and penalties. The Court considered the appellant's arguments regarding self-assessment and certification but ultimately upheld the penalties imposed by the authority.Issue 3:The legal framework for this issue included precedents such as GD Goenka Pvt Ltd v. Commissioner of Central Excise & Service Tax and Dinesh Chandra R Agarwal v. Commissioner of CGST & Central Excise. The Court analyzed the appellant's submissions regarding the discrepancy in statutory filings and the failure to rectify the error. The key evidence was the reconciliation of statutory records provided by the appellant. The Court considered the Tribunal's decisions in similar cases but emphasized the appellant's lack of action to rectify the filings. The Court concluded that the appellant's failure to address the error led to the tax liability.Significant holdings include the Court's decision to allow the appeal by way of remand, indicating that the case would be sent back to the original authority for a fresh decision after considering the documents evidencing the supply of goods not liable for tax.In conclusion, the Court analyzed the issues presented in the legal judgment, considered the relevant legal framework and precedents, interpreted the facts and evidence, and made determinations based on the application of the law. The Court's decision to remand the case for further consideration highlights the importance of addressing discrepancies in statutory filings and rectifying errors to avoid tax liabilities.