TaxTMI 
TaxTMI 
2025 (1) TMI 680
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....o service tax under reverse charge mechanism. The appellant claims that it discharged service tax liability on the advance receipts on account of construction services and on legal services under reverse charge mechanism. During the period 2013-14 to 2017-18, the appellant also gave corporate guarantees to various banks for credit facility sanctioned to associated enterprises. 3. A show cause notice dated 11.10.2019 was served upon the appellant demanding service tax of Rs. 2,40,96,546/- with the following breakup: Nature of service Differential amount of short payment Legal Services 16936 Corporate Gusrantee 5131512 Advances From Customers [Excluding Tax Already Paid On Commercial Construction & Work Contract] (20551178-1601597) 18948098 Total 24,096,546 4. The show cause also invoked the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act and the relevant portion of the show cause notice relating to this issue is reproduced below: "(ii) M/s Wellworth Project Developers Private Limited, 232-B, 4th Floor, Okhla In....
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.... the documents/information for the purpose of carrying out investigation or presented with wrong data. A.6 Further, nowhere in the impugned SCN it has been mentioned that Noticee did not cooperate during the course of investigation. If a holistic consideration and analysis be taken of the facts and circumstances, then Ld. Adjudicating Authority will not find any justification for invocation of the extended period of limitation under the proviso to Section 73(1) of the Act. A.7 The Authorized persons of the Noticee vide their letter dated 22 January 2019 submitted the documents and details called for by the department. Had the Noticee, not given any documents as demanded by the officer in charge, on time, then it could have been interpreted that Noticee is trying to suppress any facts, which might have caused delay in investigation proceedings as well. A.8 Therefore, it is submitted that invocation of the extended period of limitation is unsustainable since the complete and relevant facts with regard to the transactions in issue were available with the Department and were within its knowledge and there is no question of willful suppres....
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....nd also, short paid service tax liability of Legal Services under Reverse Charge Mechanism, even though they did not bother to self assess and deposit the due Service Tax in the Government Exchequer properly within specified time/ manner. I find that, the evasion of Service Tax referred in the SCN would have not come to light and continued unabated if investigations were not carried out by the authorities. 32.5 In the instant case, the information regarding the element of short-payment of Service Tax has genesis only after the investigations of the records of the noticee by the Department and without which the short payment of Service Tax could not have been detected. I find that such acts of the noticee can be considered as acts performed with malafide intention to evade payment of Service Tax appropriately and timely. Hence, such acts are squarely covered under the elements of deliberate suppression of facts with intent to evade payment of Service Tax as stated under proviso to Section 73 (1) supra. 32.6 The suppression of facts clearly leads to the conclusion that the Noticee had intention to evade tax. This finds support from the ratio of the jud....
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.... 29,296 Advances received from customers 2013-14 16,54,65,147 12.36% 2,04,51,495 2014-15 12.36% 0 2015-16 6,87,470 14.50% 99,683 2016-17 15.00% 0 2017-18 0 15.00% 0 Total 16,61,52,617 2,05,51,178 Corporate Guarantee 2013-14 1,60,31,648 12.36% 19,81,512 2014-15 12.36% 0 2015-16 14.50% 0 2016-17 15.00% 0 2017-18 2,10,00,000 15.00% 31,50,000 Total 3,70,31,648 51,31,512 Grand Total 20,34,05,365 2,57,11,986 8. The differential amount of short payment is as follows: Nature of service Differential amount of short payment Legal Services 16,936 Corporate Guarantee 51,31,512 Advance from Customer [excluding tax already paid o....
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....pellant and the learned authorized representative appearing for the department have been considered. 12. The first issue that arises for consideration is whether the demand confirmed for the Financial Year 2013-14 is beyond the period of 5 years so as to be time barred. 13. In this connection, it would be appropriate to first reproduce the provisions of section 73(1) of the Finance Act, as they stood at the relevant time, and it is as follows: "73.(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or ....
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....r as the advances received from customers is concerned, it would be seen from the chart contained in paragraph 7 of this order that no amount of service tax has been confirmed for the normal period. 21. In so far as the corporate guarantees is concerned, it would be seen that an amount of Rs. 31,50,000/- is the amount that has been confirmed towards service tax liability for the normal period. 22. The show cause notice, while invoking the extended period of limitation, merely mentions that as the appellant has not shown the proper value of taxable service in the returns that were filed, the appellant has contravened the provisions of the Finance Act with intent to evade payment of service tax. In the reply to the show cause notice the appellant stated that it had cooperated in the investigation conducted by the department and in fact had provided all the documents required by the department in its letter dated 22.01.2019. Thus, the appellant had not suppressed facts, much less with an intent to evade payment of service. The appellant also pointed out that specific allegations had not been made in the show cause notice regarding any mala fide intention in suppres....
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....rtlevied due to suppression of the fact that if the turnover was clubbed then it exceeded Rupees Five lakhs. ******** 4. A perusal of the proviso indicates that it has been used in company of such strong works as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 25. This decision of the Supreme Court in Pushpam Pharmaceuticals was followed by the Supreme Court in Anand Nishikawa Co. Ltd. vs. Commissioner of Central Excise, Meerut [(2005) 7 SCC 749] and the relevant paragraph is as follows:- "27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceuticals Co. v. CCE we find that "suppression of facts....
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....onstruing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso." (emphasis supplied) 28. The Supreme Court in Continental Foundation Joint Venture vs. Commissioner of Central Excise, Chandigarh[. 2007 (216) E.L.T. 177 (S.C.)] also observed in connection with section 11A(4) of the Excise Act, that suppression means failure to disclose full information with intention to evade payment of duty and the observations are as follows:- "10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as "fraud‟ or "collusion" and, therefore, has to be construed 8strictly. Mere omission to give correct information is not suppression of....
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.... that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules. 25. Departmental instructions to officers also emphasise upon the duty of officers to scrutinize the returns. The instructions issued by the Central Board of Excise & Customs on December 24, 2008 deal with "duties, functions and responsibilities of Range Officers and Sector Officers". It has a table enumerating the duties, functions and responsibilities and the relevant portion of the table is reproduced below: xxxxxxxxx 26. The Central Excise Manual published by CBEC on May 17, 2005, which is available on the website of CBEC, devotes Part VI to SCRUTINY OF ASSESSMEN....
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....dy noticed above the assessee had disclosed to the department its pricing policy by giving separate letters. It is also not disputed that the returns which were required to be filed were indeed filed. In these returns, as we noticed earlier there was no separate column for disclosing details of the deemed export clearances. Separate disclosures were required to be made only for exports under bond and not for deemed exports, which are a class of domestic clearances, entitled to certain benefits available otherwise on exports. There was therefore nothing wrong with the assessee's action of including the value of deemed exports within the value of domestic clearances." (emphasis supplied) 32. In the present case, as noticed above, the show cause notice merely alleges that as the appellant did not disclose proper value of taxable services in the ST-3 returns, payment of service tax amounting to Rs. 2,40,96,546/- escaped assessment resulting in contravention of various provision of the Finance Act and the Rules with intention to evade payment of service tax. Mere suppression of facts is not enough to invoke the extended period of limitation contemplated under the pro....
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....nd on corporate guarantees is concerned, reliance can be placed on the decision of the Supreme Court in Edelweiss Financial Services. The Supreme Court held that service tax would not be leviable as there is no flow of consideration. The relevant portion of the decision of Supreme Court is reproduced below: "4. Responding to the above, Mr. Bharat Rai Chandani, learned counsel for the assessee on caveat would read Section 65 (12) of the Finance Act, 1994 to point out that issuance of corporate guarantee to a group company without consideration would not fall within banking and other financial services and is therefore not taxable service. He would also read Section 65B (44) of the Finance Act 1994 to point out that the definition of service would indicate that it relates to only such service which is rendered for valuable consideration. 5. The counsel would next advert to paragraph 3.1.12 of the Commissioner's order where the following was recorded:- "further, the consideration can be of two types viz., monetary consideration and non monetary consideration. In the present case, the Assessee has argued that they have....