Extended period of limitation for suppression upheld, interest and penalty sustained; claimed Cenvat credit disallowed.

Invoking the proviso to the limitation provision, the analysis finds suppression of material facts, non-filing of statutory returns and withholding of records justified extension of the limitation period, resulting in sustainment of the confirmed service tax demand reduced for permitted exports/SEZ supplies; interest on the demand and penalty for suppression/contravention are upheld while an alternate penalty was set aside. Separately, absence of duty paying documents, Cenvat records and failure to claim credit in returns preclude allowance or adjustment of the claimed Cenvat credit, which is rejected.

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Issues: (i) Whether demand and recovery of service tax of Rs.32,84,675/- with interest and penalty could be sustained by invoking the proviso to Section 73(1) and imposing interest under Section 75 and penalty under Sections 78 and 77(1)(d) of the Finance Act, 1994; (ii) Whether the appellant's claim for adjustment/allowance of Cenvat credit of Rs.6,25,819/- could be allowed against the confirmed demand.

Issue (i): Whether demand and recovery of service tax of Rs.32,84,675/- with applicable interest and penalty can be sustained by invoking extended period under proviso to Section 73(1) and imposing interest under Section 75 and penalty under Sections 78 and 77(1)(d) of the Finance Act, 1994.

Analysis: The Tribunal examined documentary evidence (ITR, 26AS, invoices, bank records), statutory tests for export under Rule 6A of the Service Tax Rules, 1994 and exemption procedure for SEZ supplies under Notification No.12/2013-ST. It found export receipts of Rs.54,05,226/- and SEZ supplies of Rs.1,48,39,770/- to be exempt on fulfillment of conditions; the remaining receipts were taxable. The adjudicating authority concluded that the appellant had not filed ST-3 returns, had collected service tax from customers for domestic supplies but had not deposited it, and had withheld records and information despite notices. The Tribunal found these acts amounted to suppression of material facts and contravention with intent to evade payment, satisfying the proviso to Section 73(1) to invoke extended period. On penalty, the Tribunal applied settled principles permitting penalty under Section 78 for suppression/contravention, and upheld interest under Section 75 and penalty under Section 78; it set aside the penalty under Section 77(1)(d) in part at lower stage but affirmed penalty under Section 78 in the present appeal. The Tribunal also rejected reliance on precedents cited by the appellant as distinguishable where tax had been collected and not deposited and returns were nil.

Conclusion: Demand of service tax Rs.32,84,675/- with applicable interest under Section 75 and penalty under Section 78 is upheld by invoking proviso to Section 73(1) (suppression of facts). The penalty under Section 77(1)(d) was set aside by the appellate authority and not sustained in respect upheld amount.

Issue (ii): Whether the claimed Cenvat credit of Rs.6,25,819/- is admissible and can be adjusted against the confirmed demand.

Analysis: The Tribunal reviewed the record and found no duty-paying documents, no evidence of maintenance of Cenvat records as required under the Cenvat Credit Rules, 2004, and no claim of such credit in ST-3 returns for the period. It applied precedent on limitation and credit admissibility and observed that failure to file statutory returns and not claiming credit within prescribed procedure/time precludes allowance. The Tribunal further held that the appellant's conduct (non-filing, collection of tax without payment) disentitles it to equitable relief.

Conclusion: The claim for Cenvat credit of Rs.6,25,819/- is rejected and not allowed to be adjusted against the confirmed demand.

Final Conclusion: The adjudicated demand (reduced to account for allowed export and SEZ exemptions) together with interest under Section 75 and penalty under Section 78 stands sustained and the appellant's appeal is dismissed; the appellant's claim for Cenvat credit is refused.

Ratio Decidendi: Where a service provider, while collecting service tax or having statutory liability, suppresses material facts, fails to file required statutory returns and withholds information, the proviso to Section 73(1) of the Finance Act, 1994 permits invocation of the extended period of limitation and supports imposition of interest under Section 75 and penalty under Section 78; absence of requisite documents and failure to follow statutory procedure preclude allowance of cenvat credit under the Cenvat Credit Rules, 2004.

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