2025 (8) TMI 933 - AT - Service Tax

Extended period demand unsustainable due to no suppression; s.78 penalty set aside; s.75 tax with interest upheld; late penalty Rs.20,000

M/s. Nirman Construction Versus Commissioner of Central Excise & Service Tax, Durgapur Now Commr., CGST & CX, Bolpur Commissionerate

CESTAT KOLKATA - AT held the extended period demand unsustainable, finding no suppression by the appellant where facts were already known to Revenue; ... Invocation of extended period of limitation - service provided under the category of Construction Service for various Government and private entities - HELD THAT:- Admittedly there is no dispute that the present proceedings have been initiated for the subsequent period 2009-10 onwards till 2012-13, which is on account of periodical notice in respect of the same activity. There is nothing coming up from the Show Cause Notice that the facts in this case are different from the facts of the earlier case. Therefore, Revenue was very much aware that litigation was going on with the Appellant. Hence, they cannot make the allegation of suppression by the appellant once again. Even on considering the submission of the Ld.AR that one Return for the period April 2010 to September 2010 was not filed, this cannot be the excuse for non-issue of Show Cause Notice demanding the Service Tax for the normal period. It is found that the Return for 2009-2010 has been filed which is the immediate subsequent period after the first SCN. For this period, a periodical notice should have been issued. The Revenue was required to vigilantly follow the case and should have issued periodical notices to the Appellant so as to avoid the time bar issue. The Hon’ble Supreme Court in the case of Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT] has held that 'When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant.' The Appellant would be required to pay the Service Tax for the normal period along with interest in terms of Section 75 of the Finance Act, 1994 - the SCN has been issued proposing to impose penalty u/s 78 and in the impugned order penalty has been imposed under Section 78. The penalty u/s 78 is imposable when the suppression clause is proved by the Revenue. In the present case the confirmed demand for the extended period is not sustainable. Therefore, the penalty imposed on the Appellant u/s 78 is set aside. There is no dispute that the appellant has filed One Return belatedly. Therefore, the penalty of Rs.20,000 is sustainable and is required to be paid by the appellant. Appeal is partly allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether invocation of the extended period of limitation for assessment/demand is sustainable where an earlier show-cause notice on the same facts/issue had been issued and litigated. 2. Whether facts alleged to constitute 'suppression' justify invocation of the extended period where the Department had prior knowledge of the same facts by virtue of earlier proceedings/SCN. 3. Whether a show-cause notice issued without category-wise quantification of demand is vitiated (as raised by the Tribunal in the cited identical earlier order and relied upon in reasoning). 4. Consequential questions: (a) Liability to pay service tax for the 'normal period' and interest thereon; (b) Validity of penalty under the suppression provision (Section 78 as cited); (c) Liability to pay penalty for late filing of return. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of invoking extended period where earlier SCN on identical facts exists Legal framework: 1. Extended period of limitation (proviso to the relevant limitation provision) may be invoked where there is wilful suppression of facts; normally available only if suppression is shown. Precedent treatment (followed): 2. The Court relied on binding precedent (Supreme Court decisions) establishing that where an earlier show-cause notice has been issued on the same set of facts and the Department had the material or knowledge, subsequently invoking the extended period on the ground of suppression is not permissible. Interpretation and reasoning: 3. The Tribunal examined the record and found an earlier SCN issued for an identical issue/period and that litigation on that SCN was pending/known to the Department. The present SCN relates to subsequent periods on the same activity, but there was nothing in the later SCN to show different facts. The Department therefore had the same material/information and could not treat the later invocation as arising from newly discovered suppression. 4. Even where a single return for a short sub-period was not filed, the Tribunal held that omission did not convert the situation into suppression justifying extended limitation, particularly when the return for the immediate subsequent period had been filed and the Department ought to have issued periodical notices vigilantly to avoid time-bar issues. Ratio vs. Obiter: 5. Ratio: Where prior SCN on identical facts was known to the Department, invoking extended limitation later on the ground of suppression is legally untenable; such invocation will be set aside. (This forms the binding principle applied.) Conclusions: 6. The extended period demand was unsustainable and the demand confirmed for the extended period was set aside. Issue 2 - Whether a show-cause notice issued without quantifying demand category-wise is void Legal framework: 1. A valid SCN must sufficiently communicate the demand, including appropriate quantification, to enable the assessee to meet the case and to satisfy principles of natural justice. Precedent treatment (followed): 2. The Tribunal relied upon its own earlier order on the identical issue, which held that a SCN issued without quantifying demand category-wise is void ab initio and demands confirmed thereon are unsustainable. Interpretation and reasoning: 3. The Tribunal noted that the earlier Final Order set aside the impugned order on the ground that the SCN lacked category-wise quantification, rendering the demand legally unsustainable. The present proceedings were for subsequent periodical assessments on the same activity and nothing in the later SCN differentiated facts so as to cure the quantification defect or justify extended period invocation. Ratio vs. Obiter: 4. Ratio: An SCN without category-wise quantification of the demand is void and demand confirmed on such basis is not sustainable. (Applied as a binding principle in disposing the present appeal.) Conclusions: 5. The Tribunal applied the earlier finding and set aside the extended period demand which was predicated on similar defects and on the ground of suppression. Issue 3 - Penalty under suppression provision (Section 78) where extended demand is unsustainable Legal framework: 1. Penalty under the suppression provision (Section 78 as referenced) is contingent upon proof of suppression/wilful concealment that justifies extended assessment/demand. Interpretation and reasoning: 2. Because the Tribunal found that invocation of the extended period and the extended demand were not sustainable (no suppression), the factual foundation for imposing penalty under Section 78 ceased to exist. The causal link between suppression and that penalty was therefore absent. Ratio vs. Obiter: 3. Ratio: Where extended period demand is set aside as not sustainable for lack of suppression, penalty under the suppression provision cannot stand and must be set aside. Conclusions: 4. Penalty imposed under Section 78 was set aside. Issue 4 - Liability for service tax of the normal period, interest under Section 75, and penalty for late return Legal framework: 1. Liability for normal period assessments remains enforceable where the extended period is disallowed; interest provisions (Section 75 as cited) apply to delayed payment for normal period dues. Penalties for procedural defaults (e.g., late filing of return) are separately chargeable. Interpretation and reasoning: 2. The Tribunal made a distinction between extended period demands (disallowed) and normal period liabilities (not contested by appellant and within limitation). It therefore required payment of service tax for the normal period with interest in terms of the statute. 3. The Tribunal acknowledged one belatedly filed return and, treating that as a procedural lapse distinct from suppression, sustained a modest penalty (Rs.20,000) for that default. Ratio vs. Obiter: 4. Ratio: Disallowance of extended period demand does not absolve the assessee from paying tax and interest for the normal period; separately sustain penalties for late filing where factually established. Conclusions: 5. Appellant bound to pay service tax for the normal period with interest; penalty under suppression provision set aside; penalty for belated filing sustained (amount quantified in order). Cross-references and ancillary conclusions 1. The Tribunal explicitly followed higher-court precedent (Nizam Sugar Factory and subsequent Supreme Court rulings) and its own prior order on identical facts; those authorities were treated as directly applicable (not distinguished) and formed the primary legal foundation for setting aside the extended period demand and the suppression penalty. 2. The Tribunal emphasized departmental duty to vigilantly follow up periodical notices after an initial SCN to avoid time-bar defects; failure to do so cannot be converted into suppression by the assessee. 3. Final disposition: Appeal allowed in part - extended period demand and suppression penalty set aside; normal period tax with interest payable; belated-filing penalty sustained; appellant eligible for consequential relief as per law.