Extended limitation cannot rest on return mismatch alone; suppression must be proved, and notice on same facts fails.

Extended limitation under Section 73 of the Finance Act, 1994 was held unavailable where the demand rested only on mismatch between Form 26AS/Income Tax Returns and ST-3 returns, without independent verification or evidence of suppression, fraud, or wilful misstatement; the demand was therefore time-barred. A second show cause notice on the same issue for a later period was also held not maintainable because the department already knew the material facts when the first notice invoked the extended period. As a result, the service tax demand, interest, and penalties could not survive and the impugned orders were set aside with consequential relief.

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Issues: (i) Whether the extended period of limitation could be invoked on the basis of a mismatch between Form 26AS / Income Tax Returns and ST-3 Returns without independent verification and proof of suppression or wilful misstatement; (ii) Whether the second show cause notice for a subsequent period on the same issue was maintainable after the first notice had already invoked the extended period.

Issue (i): Whether the extended period of limitation could be invoked on the basis of a mismatch between Form 26AS / Income Tax Returns and ST-3 Returns without independent verification and proof of suppression or wilful misstatement.

Analysis: The demand was founded only on comparison of departmental data with the returns filed by the appellant. The records showed that the appellant was registered, filing ST-3 returns regularly, and had produced books of account and related documents during audit. No independent inquiry was made to ascertain the taxability of the differential amounts, and no material was brought on record to establish fraud, suppression, or wilful misstatement with intent to evade tax. In such circumstances, the ingredients necessary to trigger the extended period under Section 73 of the Finance Act, 1994 were absent.

Conclusion: The extended period of limitation was not invocable, and the demand was barred by limitation.

Issue (ii): Whether the second show cause notice for a subsequent period on the same issue was maintainable after the first notice had already invoked the extended period.

Analysis: The material facts were already within the knowledge of the department when the first show cause notice was issued. Once the department had raised a demand by invoking the extended period on the same issue, a further demand for the subsequent period could not again be sustained by resorting to the extended period on identical facts. The later notice was therefore legally impermissible.

Conclusion: The proceedings initiated by the second show cause notice were not maintainable.

Final Conclusion: The demands of service tax, interest, and penalties could not survive, and the impugned orders were set aside with consequential relief.

Ratio Decidendi: The extended period under Section 73 of the Finance Act, 1994 cannot be invoked unless suppression, fraud, or wilful misstatement is established by substantive evidence, and a subsequent notice on the same issue cannot again rely on the extended period when the material facts were already known to the department.

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