2026 (3) TMI 591 - AT - Service Tax

Extended limitation and penalty: recovery upheld where collected service tax was not disclosed or deposited by the assessee.

Extended period of limitation was applied where the assessee collected service tax from a client but failed to disclose and deposit the sums in periodical ... Demand of service tax - barred by limitation - invoking the extended period of limitation - liability for service tax collected but not deposited - penalty under Section 78 for wilful suppression. Application of extended period for suppression - liability for service tax collected but not deposited - Whether the confirmed demand of service tax is time-barred or recoverable by invoking extended limitation in view of alleged suppression and receipt of service tax from client - HELD THAT:- The present litigated amount of Rs. 5,91,883/- is very much part of the Service Tax amount paid by the client to the appellant. Therefore, when the appellant has received the amount as Service Tax but the same was not disclosed in the ST 3 Return and not paid to the exchequer, the benefit of extended period cannot be extended to the appellant. The cited case laws of the Learned Advocate, which are basically on account of non payment of Excise Duty / Service Tax on account of bonafide belief, interpretation, disclosure of details in the Returns etc., cannot be come to the rescue of the appellant, in view of the factual details discussed above. Confirmed demand of service tax for the stated periods is not time-barred and is recoverable by invoking the extended period. Final Conclusion: The appeal is dismissed; the Tribunal upheld the Adjudicating Authority's finding that the confirmed service tax was collected by the appellant but not deposited, permitting invocation of the extended limitation period and sustaining the demand and the mandatory penalty. Issues: (i) Whether the confirmed demand of service tax of Rs. 5,91,883/- is time-barred or can be sustained by invoking the extended period of limitation; (ii) Whether the appellant suppressed material facts and is liable for recovery of the tax collected and for penalty.Issue (i): Whether the confirmed demand of Rs. 5,91,883/- is barred by limitation or is actionable under the extended period provisions.Analysis: The Adjudicating Authority found documentary evidence (award letter, payment certificates) showing that the client treated its work as taxable and paid service tax to the appellant under reverse charge after abatement; the amount corresponded to payments in 2016-17 and 2017-18 (upto June 2017). The Authority examined agreements and records, dropped the bulk of the original demand, and specifically computed the contested amount as tax collected by the appellant but not deposited. The Tribunal notes no departmental appeal was filed against the large portion dropped, indicating acceptance of those findings by the Revenue. The Tribunal compared the factual matrix against precedents relied upon by the appellant and distinguished those authorities as relating to bona fide disputes of liability and disclosure in returns, which are not present on these facts.Conclusion: The confirmed demand of Rs. 5,91,883/- is not time-barred; the extended period of limitation was rightly invoked. This conclusion is against the assessee.Issue (ii): Whether the appellant suppressed material facts, having collected service tax from the client and failed to deposit it, thereby attracting recovery and penalty.Analysis: The Adjudicating Authority recorded that the appellant voluntarily obtained service tax registration, received payments on taxable services from WAPCOS (with local sales tax deducted at source), and collected service tax amounts which were not deposited into government accounts. The Authority found non-filing of periodical returns and intentional non-disclosure, characterising it as suppression with intent to evade tax, and applied the statutory penal provision for mandatory penalty. The Tribunal accepted the Authority's factual findings after reviewing the documentary evidence and found the cited case law inapplicable to these facts.Conclusion: The findings of suppression, recovery of tax collected but not deposited, and liability for mandatory penalty are upheld. This conclusion is against the assessee.Final Conclusion: On the issues decided, the adjudicated demand of Rs. 5,91,883/- together with interest and penalty is sustained and the appeal is dismissed, leaving the adjudicating authority's order intact.Ratio Decidendi: Where an assessee has collected service tax from a client on taxable services and has failed to disclose and deposit such tax in periodical returns, the extended period of limitation for recovery applies and the assessee may be held liable for mandatory penalty for suppression of facts.