2025 (8) TMI 6 - AT - Service Tax

Extended limitation period denied as returns filed regularly; demand set aside for lack of evidence and quantification errors

M/s. Nirman Construction Versus Commissioner of Central Excise, Service Tax and Customs, Durgapur Commissionerate, Burdwan (West Bengal)

The CESTAT Kolkata held that the extended period of limitation could not be invoked as the appellant had regularly filed returns and furnished all ... Time limitation - suppression of facts or not - it is the contention of the Revenue that the appellant has not furnished all the relevant details in the S.T.-3 Returns filed - HELD THAT:- It is observed that appellant have filed their Returns regularly and furnished all the information before the Departmental authorities. Thus, the demand raised in the Show Cause Notice dated 09.08.2010 by invoking the extended period of limitation for the period from 2005-06 to 2008-09, on the basis of difference observed between figures in the balance sheet / Profit & Loss Account and S.T. Returns filed, is legally not sustainable. The Show Cause Notice in this case has been issued on the basis of the data available in the statutory records of the appellant, which were always open to the Department for any query / scrutiny. The Department has also failed to bring any corroborative evidence on record to establish suppression of facts with the intent to evade payment of Service Tax, on the part of the appellant herein. Under such facts and circumstances, the submission of the appellant that the extended period of limitation cannot be invoked for confirming the demand of Service Tax against them, is agreed upon. A similar view has been expressed by this Tribunal in the case of M/s. Munna Construction v. Commissioner of C.Ex. & S.T., Jamshedpur [2024 (11) TMI 1136 - CESTAT KOLKATA] where it was held that 'the demand cannot be raised in this case by invoking the extended period of limitation. Thus, we hold that the demand confirmed in the impugned order by invoking the extended period of limitation is not sustainable.' Thus, the invocation of extended period of limitation is not sustainable in the facts and circumstances of the case. Accordingly, the demand of service tax confirmed in the impugned order is liable to be set aside, being barred by limitation. The Show Cause Notice, issued without quantifying the demand of Service Tax category-wise, is void ab initio and hence the demand of Service Tax confirmed on the basis of such Notice is legally not sustainable. Consequently, the demand of Service Tax confirmed in the impugned order is not sustainable and hence, the same is set aside - As the demand of Service Tax is not sustained, the question of demanding interest and imposing penalties does not arise. Accordingly, the demand of interest and penalties imposed in the impugned order set aside. Appeal allowed. ISSUES: Whether the demand of Service Tax confirmed by invoking the extended period of limitation is sustainable where no suppression of facts with intent to evade tax is established.Whether a Show Cause Notice issued without specifying or quantifying Service Tax liability category-wise is valid and sustainable.Whether the appellant is entitled to abatement benefits under Notification No. 01/2006-ST dated 01.03.2006.Whether interest and penalties can be imposed when the demand of Service Tax itself is not sustainable. RULINGS / HOLDINGS: The demand of Service Tax confirmed by invoking the extended period of limitation is not sustainable in the absence of any evidence of suppression of facts with intent to evade tax, as the appellant had filed returns regularly and disclosed all relevant information; therefore, the extended period cannot be invoked.A Show Cause Notice issued merely on the basis of difference between figures in the balance sheet and ST-3 Returns, without specifying or quantifying the Service Tax demand category-wise, is void ab initio and such demand is not sustainable in law.The appellant's claim for abatement benefits under Notification No. 01/2006-ST was denied by the adjudicating authority due to lack of documentary evidence regarding utilization of materials; however, this issue is not determinative given the demand itself is set aside on limitation and procedural grounds.Since the demand of Service Tax is not sustained, the imposition of interest and penalties under Sections 76 and 78 of the Finance Act, 1994, also cannot be sustained and are set aside accordingly. RATIONALE: The Court applied the statutory provisions relating to limitation under the Finance Act, 1994, holding that extended period of limitation under Section 73(1) is invokable only where there is suppression of facts with intent to evade tax, which was not established here.The Court relied on precedents emphasizing that a Show Cause Notice and adjudication order must specify the taxable service category and quantify the demand accordingly; failure to do so renders the notice vague and legally unsustainable.The Court noted that data used to raise demand was already available in statutory records (balance sheet, Profit & Loss Account, ST-3 Returns) accessible to the Department, negating any claim of concealment or fraud.Precedents cited include decisions holding that demands based solely on differences in accounting figures without specific service categorization are invalid, and that extended limitation periods cannot be applied absent fraudulent suppression.The Court observed that interest and penalties are contingent on valid tax demands; hence, when the principal demand fails, ancillary charges also fail.