Extended limitation for service tax demand fails where disclosure negates suppression and intent to evade tax.

Extended limitation under the proviso to Section 73(1) of the Finance Act, 1994 could not be invoked without evidence of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax. Mere non-payment or short payment was insufficient, and the assessee had disclosed relevant returns, income-tax records, bank statements, and reconciliation worksheets during inquiry. The absence of deliberate concealment, the demand being enhanced on the assessee's own quantification, and available unutilised Cenvat credit exceeding the tax liability all negatived intent to evade. The demand was therefore barred by limitation.

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Issues: Whether the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was validly invoked for the demand of service tax, and whether the demand was consequently sustainable.

Analysis: Invocation of the extended period requires proof of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax. Mere non-payment or short payment is insufficient. The appellant had furnished relevant documents during inquiry, including returns, income-tax records, bank statements, and reconciliation worksheets, and there was no material showing deliberate concealment or falsification. The demand was also enhanced on the basis of the appellant's own quantification during adjudication, which further weakened the allegation of intent to evade. The existence of unutilised Cenvat credit exceeding the tax liability during the relevant period also negatived the allegation of evasion.

Conclusion: The extended period of limitation was not sustainable and the demand was barred by limitation. The issue was decided in favour of the assessee.

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