Extended limitation and penalties fail where tax facts were disclosed and the dispute was only interpretational.

Where an assessee regularly filed ST-3 returns and the Department was already aware of the relevant receipts through audits and earlier correspondence, suppression, mis-declaration, fraud or intent to evade tax could not be alleged. The dispute being interpretational in nature, the extended period of limitation was not available. In the absence of mens rea or any material showing wilful non-disclosure, penalties could not be sustained. The normal-period demand remained unaffected, but the time-barred demand and all penalties were set aside.

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Issues: Whether the extended period of limitation could be invoked and penalties sustained where the assessee had disclosed the relevant facts to the Department and the dispute was interpretational in nature.

Analysis: The appellants were regular service tax filers and had been submitting ST-3 returns. The records showed that the Department had conducted audits and was aware of the receipts towards excess baggage charges and the discount received from the airport authority on passenger service fee. The assessee had also acted on the Department's advice in earlier years. On these facts, there was no basis to allege suppression, mis-declaration, fraud or intent to evade tax. The dispute was also one of interpretation, and such matters do not justify invocation of the extended period. In the absence of mens rea, penalties could not survive.

Conclusion: The extended period of limitation was not invocable and the penalties were unsustainable.

Final Conclusion: The appeal succeeded to the extent that the demand for the extended period and all penalties were set aside, while the demand for the normal period was maintained.

Ratio Decidendi: Where the Department is already aware of the relevant facts and the dispute turns on interpretation of law, the extended period cannot be invoked and penalties cannot be imposed absent suppression or intent to evade.

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