2025 (10) TMI 735 - AT - Service Tax

Appeal dismissed; suppression of taxable receipts fraudulent, extended limitation under Section 73 applied; penalties under Sections 78 and 77(2) upheld

CESTAT held the appeal devoid of merit and dismissed it. The tribunal found the appellant suppressed taxable receipts in ST-3 returns and statutory ... Evasion of service tax - appellant in their filed ST-3 returns had mis-stated and suppressed the taxable value - case against the appellant is based on comparison of the receipts against the provision of taxable services through cash and by way of credit in their account electronically, with the amounts reflected in the ST-3 returns for the period in dispute - extended period of limitation - levy of penalties - HELD THAT:- Except for Month-wise daily sale sheet printout, which was resumed by the officers during the search of the premises of RDS Hospitality Pvt. Ltd. in the presence of Shri Gufran Khan who is one of the Directors in RDS Hospitality Pvt. Ltd. and is also the Proprietor of appellant all other documents were provided by the appellant (Shri Gufran Khan) during the course of investigation on the summons issued to him. Even at the time of search of premises of M/s RDS Hospitality Pvt. Ltd., Shri Gufran Khan was present in that premises and he in his statement dated 08.12.2017 recorded on the spot at the time of search admitted the fact of resumption/ recovery of the same and also informed that these pertain to the Appellant. (Shri Gufran Khan is Proprietor of the Appellant). It is totally absurd on the appellant to claim, that Shri Gufran Khan is uneducated and not aware of law etc. Shri Gufran Khan having DIN 03381886 has been Director in M/s RDS Hospitality Pvt. Ltd. a private limited company incorporated on Feb 10, 2011. Further the fact that appellant was issuing invoices/ bills showing service tax (including cess) from its client (service recipients) is established from the Bill Book provided by the appellant during the course of investigation. Though appellant was collecting the service tax (including cesses) from his clients but was not depositing the same with the exchequer is evident from the ST-3 returns filed. Appellant has for some of the period not even filed the ST-3 returns and for the period during which they have filed the ST-3 return i.e. April 15 to September 2016 they have grossly under declared the Gross Receipts and service tax payable - The show cause notice has in great depth analyzed the various documents submitted by the appellant during the course of investigation and have concluded how the appellant was manipulating and suppressing the receipts in the statutory documents namely Balance Sheet and Income Tax Return (ITR) also. Extended period of limitation - HELD THAT:- Appellant has from the time of initiation of proceedings have taken a stand that his Chartered Accountant has fraudulently filed returns suppressing the gross receipt. For the fraud committed by the C A he has filed an FIR and also complaint with the ICAI. It is observed that this submission is itself enough, to hold that appellant ST-3 returns were filed by suppressing the gross receipts/ taxable value of services provided with the intent to evade payment of service tax. It is act of commission of fraud, suppression with intent to evade payment of tax which is material for invoking the extended period of limitation as per proviso to Section 73 (1) and not the person who has committed the said act of fraud or suppression. Penalty u/s 78 - HELD THAT:- The appellant has suppressed the value of the taxable services rendered with the intention to evade payment of service tax and extended period of limitation is invokable for making the demand, the imposition of penalty under Section 78, is justified in view of the decision of the Hon’ble Apex Court in the case of Rajasthan Spinning and Weaving Mills Ltd. [2009 (5) TMI 15 - SUPREME COURT]. Penalty u/s 77 (2) - HELD THAT:- As appellant has failed to assess the correct service tax liability and deposit the same the penalty under Section 77 (2) has been rightly imposed upon the appellant. There are no merits in this appeal - appeal dismissed. Issues: (i) Whether the demand of service tax (including cesses) for the period September 2015 to June 2017 and interest is sustainable; (ii) Whether extended period of limitation (proviso to Section 73(1)) and mandatory penalty under Section 78 are invocable for alleged suppression with intent to evade tax; (iii) Whether CENVAT credit claimed beyond the time limit is admissible and whether penalties under Sections 76 and 77(2) are correctly imposed.Issue (i): Whether the demand of service tax, cesses and interest as quantified is sustainable.Analysis: The adjudication relied on month-wise daily sale sheets recovered during search, bank statements, bill receipt books, ITRs and ST-3 returns showing discrepancies. The proprietor admitted recovery of the sale sheets and acknowledged receipts. The tribunal accepted reconciliation of receipts from the sale sheets and bank records as taxable consideration and applied the applicable rates of service tax and cesses for the relevant periods to compute tax, interest and shortfall.Conclusion: Demand of service tax, Swachh Bharat Cess and Krishi Kalyan Cess for the period September 2015 to June 2017 and interest under Section 75 is confirmed in favour of Revenue.Issue (ii): Whether the extended period of limitation and mandatory penalty under Section 78 apply.Analysis: The records show discrepancies across statutory returns, bank statements and documents recovered during search; the proprietor made admissions in statements recorded under Section 14; and the assessee failed to explain or rebut the material that indicated suppression of taxable receipts. The tribunal found these facts indicative of willful suppression/misstatement with intent to evade tax and applied the proviso to Section 73(1) to invoke extended limitation and imposed penalty under Section 78, with conditional reduction if amounts paid within 30 days.Conclusion: Extended period of limitation is invocable and mandatory penalty under Section 78 is imposed in favour of Revenue.Issue (iii): Admissibility of CENVAT credit and imposition of penalties under Sections 76 and 77(2).Analysis: Input/service invoices produced post-investigation were not taken in returns within the statutory time-limit; Rule 4(7) of the CENVAT Credit Rules, 2004 bars availment after one year. The tribunal allowed only CENVAT credit actually reflected and timely claimed in ST-3 returns and dismissed other credit claims as time-barred. For failure to assess and deposit correct tax and to file returns, penalties under Sections 77(2) and 76 were considered; penalty under Section 76 was dropped while penalty under Section 77(2) was imposed.Conclusion: Only CENVAT credit properly claimed within time is allowed; other credit claims are rejected. Penalty under Section 77(2) is upheld and penalty under Section 76 is dropped; overall disposition is partly adverse to the assessee and in favour of Revenue.Final Conclusion: The appeals are dismissed and the impugned demands, interest and specified penalties are confirmed except as specifically allowed (limited CENVAT credit and dropping of certain demands/penalties); the revenue assessment and quantification as per the impugned order stand upheld.Ratio Decidendi: Where recovered documentary evidence and bank records, corroborated by admissions, demonstrate non-disclosure of taxable receipts and contradict statutory returns, the extended period of limitation under proviso to Section 73(1) is invocable for demanding tax and mandatory penalty under Section 78; CENVAT credit is admissible only if availed within the time limits prescribed by the CENVAT Credit Rules, 2004.