2026 (3) TMI 438 - AT - Service Tax

Extended limitation period requires proof of fraud or suppression; absent such proof, extended limitation cannot be invoked.

Proviso to Section 73(1) of the Finance Act, 1994 permits extended limitation only where there is evidence of fraud, collusion, wilful misstatement or ... Invocation of the extended period of limitation - time barred demand - wrongful availment of inward services received prior to July 1, 2012 - audit, or operation under self-assessment - threshold in the absence of specific factual allegations of fraud, collusion, wilful misstatement or suppression with intent to evade tax - burden of proof for credit admissibility - best judgment assessment​​​​​​​ - self-assessment and officer's duty to scrutinise returns. Extended period of limitation - Invocation of the extended period of limitation under the proviso to Section 73(1) was not justified and the demand is time-barred. - HELD THAT:- The show cause notice and the impugned order relied solely on the fact that the irregularity was detected during audit and did not allege or establish fraud, collusion or deliberate suppression by the appellant. The appellant, a state instrumentality, had obtained registration and filed ST-3 returns for the relevant period and availed CENVAT credit as reflected in those returns. The Tribunal applied the settled principle that the extended period cannot be invoked absent positive evidence of wilful suppression with intent to evade tax; mere detection during audit or operation under self-assessment does not, by itself, establish such intent. The decision of the adjudicating authority showed non-application of mind to the statutory prerequisites for invoking the proviso to Section 73(1). Following the decision in G.D. Goenka [2023 (8) TMI 995 - CESTAT NEW DELHI] the Tribunal in the case of Delhi Airport Metro Express Pvt Ltd. [2024 (1) TMI 777 - CESTAT NEW DELHI] examined the facts of the said case and held that the appellant had not suppressed any information from the Department in the ST-3 Returns nor is there any allegation in the show cause notice or finding in the impugned order that a particular fact had not been disclosed. Since all that has been stated is that the appellant was not entitled to take CENVAT Credit, but as it had taken, it suppressed material facts from the Department. Referring to the cardinal principles of law in examining the invocation of the extended period, the Bench held that mere suppression of fact is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of service tax and in the absence thereof, the extended period of limitation cannot be invoked. Relying on precedents that place the onus of scrutiny on the assessing officer and reject the inference of suppression merely because an irregularity surfaced in audit, the Tribunal concluded that Revenue failed to prove the necessary ingredients for the extended period. [Paras 9, 11, 15, 16, 17] The demand is rejected as barred by limitation and the appeal is allowed. Final Conclusion: The Tribunal held that Revenue did not establish suppression with intent to evade and therefore could not invoke the extended period; the demand confirmed by the lower authority is time-barred and the appeal is allowed. Issues: (i) Whether the proviso to Section 73(1) of the Finance Act, 1994 permitting invocation of the extended period of limitation can be invoked to demand CENVAT credit alleged to have been wrongly availed where the alleged irregularity was detected during audit and there is no specific allegation or evidence of fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax.Analysis: The issue requires examination of the statutory threshold for invoking the extended period under the proviso to Section 73(1) of the Finance Act, 1994 and whether detection of the alleged wrongful availment during audit, or operation under self-assessment, satisfies that threshold in the absence of specific factual allegations of fraud, collusion, wilful misstatement or suppression with intent to evade tax. The legal framework includes Section 73(1) (proviso) and related provisions, the Cenvat Credit Rules, 2004 (including Rule 9(6) and Rule 15(3)), and the scheme of Sections 72 and 78 of the Finance Act, 1994 concerning scrutiny, assessment and penal consequences. Precedents establish that invocation of the extended period demands proof of one of the specified aggravating circumstances (fraud, collusion, wilful misstatement or suppression with intent to evade) and that routine detection by audit or mere existence of self-assessment does not by itself demonstrate such conduct. The returns format and filing practice (ST-3 returns) and the statutory role of the department in scrutinising returns and making best judgment assessments are relevant to determine whether information was suppressed. In the present facts, the show cause notice and impugned order record detection by audit but do not allege or establish any positive act of suppression, fraud or wilful misstatement by the appellant; the appellant was a state instrumentality, registered and filing ST-3 returns, and there is no material showing deliberate concealment with intent to evade tax.Conclusion: The proviso to Section 73(1) of the Finance Act, 1994 cannot be invoked in the present case; the demand is time barred and liable to be rejected. The appeal is allowed in favour of the assessee.Ratio Decidendi: The extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 is invocable only where there is evidence of fraud, collusion, wilful misstatement or suppression of facts with intent to evade tax; detection of an alleged irregularity solely by departmental audit or operation under self-assessment, without specific proof of such conduct, does not justify invoking the extended period.