Service provider's failure to file ST-3 returns and pay 2016-17 service tax held willful suppression; demand upheld

Failure to discharge service tax and file ST-3 returns for 2016-17 was examined on the basis that a registered service provider rendering taxable services under ss. 65B(44) and 66B, read with ss. 68 and 70 of the Finance Act, 1994, was statutorily obliged to file returns and disclose receipts. The Tribunal held that non-filing of returns, non-response to departmental queries, and withholding information revealed only through income-tax data constituted willful suppression with intent to evade, justifying invocation of the extended limitation period under the proviso to s. 73(1); the tax demand was upheld. Consequentially, interest under s. 75 and penalties under ss. 78 and 77(1)(c), and late fee under r. 7C, were sustained, and the appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was rightly invoked on the facts found, so as to sustain the confirmed service tax demand for the relevant taxable services.

(ii) Whether, upon upholding the demand within the extended period, consequential liabilities of interest under Section 75 and penalty under Section 78 were sustainable.

(iii) Whether the appellant's admitted non-filing of ST-3 returns and non-furnishing of information sought by the Department justified late fee under Section 70 read with Rule 7C and penalty under Section 77(1)(c).

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Invocation of extended limitation under proviso to Section 73(1)

Legal framework: The Court examined the statutory obligation to file returns and self-assess and the Department's power to invoke the extended period where there is willful suppression with intent to evade, as reflected in the proviso to Section 73(1). The Court also noted the statutory scheme requiring filing of ST-3 returns (Section 70 and Rule 7 of the Service Tax Rules, 1994) and payment obligations (Section 68).

Interpretation and reasoning: The Court found it undisputed that the appellant was registered, provided taxable services, did not file any ST-3 returns for the period, and did not respond to departmental letters seeking reconciliation and documents. The Court treated the appellant's continued non-compliance-both failure to file returns and refusal to supply information despite repeated queries-as conduct evidencing intentional and willful withholding of material facts. The Court held that the Department came to know of the receipts only through information from another authority; the appellant's conduct prevented proper determination of liability and compelled the Department to proceed on the available differential figures. On these facts, the Court concluded that the extended period was correctly invoked, and the cited Supreme Court decision relied upon by the appellant did not assist because intention to evade is a factual inference drawn from conduct in the present record.

Conclusion: Extended period of limitation under the proviso to Section 73(1) was held to be rightly invoked; the plea that the demand was time-barred was rejected.

Issue (ii): Sustainability of interest under Section 75 and penalty under Section 78 upon upholding the demand

Legal framework: The Court considered Section 75 for interest on delayed payment and Section 78 for penalty linked to suppression/intent to evade, and treated these as consequential to the sustained invocation of the extended period and confirmed tax demand.

Interpretation and reasoning: The Court held that once the demand is upheld within the extended period on willful suppression with intent to evade, interest follows as a corollary to the confirmed tax liability. It further held that, having upheld the extended period invocation based on suppression with intent to evade, penalty under Section 78 "follows" on the same factual foundation.

Conclusion: Interest under Section 75 and penalty under Section 78 were upheld along with the confirmed service tax demand.

Issue (iii): Late fee for non-filing of returns and penalty for non-furnishing of information

Legal framework: The Court considered the mandatory return-filing obligation under Section 70 and the late-fee mechanism under Rule 7C of the Service Tax Rules, 1994, and penalty for failure to furnish information under Section 77(1)(c).

Interpretation and reasoning: The Court treated non-filing of ST-3 returns by the due date as admitted and undisputed, and held that the late fee imposed under Rule 7C is a civil liability for non-performance of statutory obligations and therefore sustainable. Separately, the Court found that the appellant's deliberate non-response to communications seeking information regarding services and receipts justified penalty under Section 77(1)(c), as the non-furnishing of information obstructed determination of tax liability.

Conclusion: Late fee under Section 70 read with Rule 7C and penalty under Section 77(1)(c) were upheld.

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