2025 (12) TMI 1144 - AT - Service Tax

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 ... Non-payment of service tax - appellant had not filed any ST-3 return for the period 2016-17 and also did not provide any information when called for, - evasion of service tax by suppressing material facts from the department - recovery alongwith interest and penalty - invocation of extended period of limitation - HELD THAT:- It is evident that the appellant was registered with the service tax department and was engaged in providing services as defined by Section 65 B (44) and which were taxable as per Section 66B of the Finance Act, 1994. The provisions of section 68 and 70 mandated mandatory filing of the return by the person who was providing the taxable services and was registered with the department. Admittedly and undisputedly appellant did not file any return as required under the statute. It is also evident when the department made enquiries from the appellant in respect of the receipts towards provision of services appellant again chose not to respond and provide the requisite information so that proper view could have been taken in respect of the receipts towards the provision of services which came to the knowledge of department only thorough the information provided by the income tax department. It is not the case that no effort were made by the department to investigate the differences noticed in the figures of receipts towards provision of services, as provided by the income tax department and the figures available with the service tax department. As appellant did not respond to the repeated correspondences, the department was left with no option other than to proceed by making demand on the difference value. The conduct of the appellant in the proceedings clearly show that they had intentionally, knowingly and willfully refused to provide the desired information with intention to evade the payment of service tax due. Invocation of extended period of limitation - HELD THAT:- From the facts as brought out in this case it is evident that appellant by not filing the returns and not providing the information called for have willfully suppressed the relevant facts from the department to evade the payment of due service tax. Intention to evade payment of service tax is to be determined from the conduct of the appellant and the facts of case. This being a question of fact, cannot be determined on the basis of certain decisions - it is found from the conduct of appellant, that he had suppressed the fact with intent to evade payment of service tax and extended period of limitation has been rightly invoked for making the demand. In case of Security Electronics Pvt. Ltd. [2024 (8) TMI 1052 - CESTAT HYDERABAD] Hyderabad Bench held that 'the grounds on which the Commissioner (Appeals) has upheld the decision of the Adjudicating Authority for invoking extended period are correct and therefore, there is no need to interfere with the findings of the Commissioner (Appeals) on this issue.' There are no merits in the submissions made by the appellant to effect that demand is hit by limitation and extended period could not have been invoked as per the proviso to Section 73 (1) of the Finance Act, 1994. As the invocation of extended period of limitation as per proviso to Section 73 (1) is upheld, the penalty under section 78 follows as has been held by the Hon’ble Apex Court in case of Rajasthan Spinning and Weaving Mills Ltd. [2009 (5) TMI 15 - SUPREME COURT] - As the demand of Service Tax upheld, the demand of interest under Section 75 of the Finance Act, 1994 is also upheld. It is admitted and undisputed that the appellant had not filed the ST-3 returns for the period of dispute by the due date and hence the late fees imposed upon them in terms of Rule 7C of Service Tax Rules, 1994 which is in nature of civil liability for not performing the acts as per the provisions of the statute is also upheld - As the appellant had deliberately not responded to the communications made by the department seeking information in respect of the services provided by them penalty imposed under Section 77 (1) (c) is also justified and is upheld. There are no merits in the appeal - Appeal dismissed. 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.