Extended limitation requires deliberate suppression with intent to evade; non-filing alone cannot sustain a time-barred service tax demand

Under Section 73(1) of the Finance Act, 1994, a service tax demand issued beyond the normal limitation period can proceed only if the extended period is validly invoked. The analysis states that non-registration, non-filing of returns, or non-declaration of an activity, without deliberate misstatement or suppression intended to evade tax, does not independently establish the required jurisdictional basis. This is particularly relevant where the dispute is interpretational and arises from the assessee's records. On that reasoning, the extended limitation period was unavailable, making the demand time-barred and the proceedings unsustainable, including the proposed tax, interest, and penalty.

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Issues: Whether the extended period of limitation under Section 73(1) of the Finance Act, 1994 was validly invoked for the service tax demand, and whether the proceedings were consequently without jurisdiction.

Analysis: The notice dated 24.07.2009 covered the period 10.09.2004 to 31.03.2007. For the relevant period, the normal limitation under Section 73(1) of the Finance Act, 1994 was one year, and the return for the period ending 31.03.2007 was required to be filed under Rule 7 of the Service Tax Rules, 1994 by 25.04.2007. The demand was therefore beyond the normal period and could survive only if the extended period was properly invocable. The only basis relied on was that the liability came to light during audit and that returns had not been filed. The reasoning accepted that mere non-registration, non-filing of returns, or non-declaration of activity does not by itself amount to wilful suppression or establish intent to evade tax, particularly where the dispute is interpretational and arises from the assessee's records. In the absence of deliberate misstatement or suppression with intent to evade, the jurisdictional condition for invoking the extended period was not satisfied.

Conclusion: The extended period of limitation was not invocable; the demand was time-barred and the show cause notice failed on jurisdiction. Consequently, the proceedings were void and no demand of tax, interest, or penalty survived. This issue was decided in favour of the assessee.

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