TaxTMI 
TaxTMI 
2024 (11) TMI 208
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....nd 2014-15 were audited and it was found that the appellant had considered sale of development rights as non-taxable and had not paid service tax on the consideration received for transfer of development rights. 3. The department felt that the transfer of development rights became a 'service' with effect from 1.7.2012 as per section 65B (44) of the Finance Act, 1994 the Finance Act and therefore, it was taxable. It was also felt that as per Rule 5 of the Point of Taxation Rules, 2011, tax was payable. Accordingly, SCN dated 15.11.2016 was issued to respondent proposing demand of Rs. 7,11,91,036 as service tax along with interest under section 75 and penalties under sections 76,77 and 78 of the Finance Act. 4. The proposals in the SCN were dropped by the Commissioner by the impugned order dated 28.03.2018. The Revenue has filed this appeal to assail this order. 5. Learned authorised representative for the Revenue made the following submissions: i) The Commissioner gravely erred in not deciding whether the transaction of 'transfer of development rights' is a service under section 65B(44) read with section 65B(51) of the Finance Act. ii) The Commissioner als....
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.... 73 of the Finance Act. Extended period of limitation can be invoked if the non-levy, non-payment, short levy, short payment or erroneous refund is because of (a) fraud; or (b) collusion; or (c) willful mis-statement or (d) suppression of facts; or (e) violation of the provisions of the Act or the Rules with an intent to evade payment of service tax. 9. The reasons indicated in the SCN for invoking extended period of limitation are in paragraph 5.6 which is reproduced below: "5.6. It further appears that the assessee had deliberately and willfully suppressed material facts related to non-payment of service tax on consideration received by the assessee against transfer of development rights. No disclosure regarding this transaction was made by the assessee in their ST-3 returns filed by the assessee during the relevant period. Thus, the said amount has escaped the assessment of service tax liability and subsequent payment thereof to the credit of the Government account in respect of such amounts. All these actions of assessee amount to non-disclosure of facts to the department, resulting in contravention of various provisions of the Finance Act and the Service Tax Rules ....
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....ovisions of the Act and Rules with an intent to evade payment of service tax as applicable. d) These facts would not have come to the notice but for the audit and therefore, extended period of limitation is invokable. 12. We have examined these grounds in the SCN for invoking extended period of limitation. Section 73 of the Finance Act provides for recovery of service tax not levied, not paid, short levied, short paid or erroneously refunded. This section enables invoking extended period of limitation to raise a demand on the following grounds: a) Fraud; or b) Collusion; or c) Wilful misstatement; or d) Suppression of facts; or e) Violation of the Act or Rules with an intent to evade payment. 13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an active suppression with an intent to evade payment ....
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....n its ST-3 returns has no legs to stand on. ST-3 Return does not require transaction wise details. It only requires the assessee to disclose the aggregate value of the taxable services provided during the period, service tax paid, CENVAT credit availed and utilised, etc. There is neither any responsibility on the appellant nor any scope to disclose individual transactions in the ST-3 returns. 17. It is also the case of the Revenue that but for the audit, the alleged non-payment of service tax would not have come to light. It is not possible to accept this contention. It is undisputed that the appellant was self-assessing service tax and filing ST-3 Returns. Unlike the officers, the assessee is not an expert in taxation and can only be expected to pay service tax and file returns as per its understanding of the law. The remedy against any potential wrong assessment of service tax by the assessee is the scrutiny of the Return and best judgment assessment by the Central Excise Officer under section 72 of the Finance Act. This section reads as follows: "72. Best judgment assessment. If any person, liable to pay service tax,- (a) fails to furnish the return under se....
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....t Taxation Report of the Task Force on Indirect Taxation 2002, Central Board of Excise and Service Tax, Government of India.. The observation made in the context of Central Excise but also found to be relevant to Service Tax is reproduced below: It is the view that assessment should be the primary function of the Central Excise Officers. Self-assessment on the part of the taxpayer is only a facility and cannot and must not be treated as a dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty payment. No doubt, audit and anti-evasion have their roles to play, but assessment or confirmation of assessment should remain the primary responsibility of the Central Excise Officers. (emphasis supplied)" 20. Therefore, it is incorrect to say that had the audit not been conducted, the alleged non-payment of service tax would not have come to light is neither legally correct nor is it consistent with the CBEC's own instructions to its officers. 21. For the sake of completeness, it needs to be pointed out that the aforesaid Manual provides for two levels of scrutiny- preliminary scrutiny of all Returns and Detailed Scruti....
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....007 CX.4, dated 08.02.2007, which makes it mandatory to scrutinize returns on a regular basis. Details of the Board's guidelines on returns' scrutiny are discussed in Chapter 2 of this Manual. 1.2.2B The guidelines clearly envisaged that returns' scrutiny would become the core function of the Service Tax Group/Range, supervised by the Assistant Commissioner of the Service Tax Unit." 22. Thus, the CBEC took a conscious decision that detailed scrutiny of the Returns should be done only in some cases selected based on some criteria. In those Returns, where detailed scrutiny is not done by the officers some tax may escape assessment which may not be discovered within the normal period of limitation. Such loss of Revenue, needless to say, is a risk which is taken as a matter of policy by the CBEC. 23. To sum up: a) The respondent assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else. b) It is the responsibility of the Central Excise Officer with whom the Returns are filed to scrutinise them and if necessary, make the best judgm....