CESTAT Delhi Rules, Extended Limitation Can’t Be Invoked Without Proof of Tax Evasion Intent
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi has held that the extended period of limitation under Section 73(1) of the Finance Act can be invoked only when the department establishes a deliberate and conscious intention to evade service tax. The Tribunal ruled that merely detecting a lapse during audit cannot automatically be equated with suppression of facts or wilful evasion.
A Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) allowed the appeal filed by M/s Omaxe for EST Spa & Hills Developers Limited challenging a demand raised for the period from July 2010 to June 2012 relating to service tax on car parking charges collected from homebuyers. The department had issued a show cause notice in March 2014 invoking the extended five-year limitation and alleging suppression of facts, which led to a demand of more than ₹34 lakh along with penalties. The adjudicating authority confirmed the demand and the Commissioner (Appeals) later upheld it.
The Tribunal noted that the entire case of the department rested on the fact that the issue came to light only during the audit, and that the assessee had failed to self-assess service tax on car parking charges. Rejecting this reasoning, the Bench held that non-payment during the normal period does not automatically constitute suppression with intent to evade. It observed that the show cause notice did not contain material to prove any deliberate act of concealment and that the Commissioner (Appeals) wrongly presumed intention to evade merely because the assessee had not paid the tax.
The Tribunal emphasised that the dispute was interpretational in nature. Car parking charges had not been taxed under the pre-negative list regime, and the appellant began paying tax from July 2012 onwards when the negative list came into effect. In such circumstances, the Bench held that the appellant’s conduct could not be treated as mala fide, especially when it had been regularly filing returns and maintaining records. The Tribunal also noted that in a self-assessment system, it is equally the responsibility of departmental officers to scrutinise returns and call for information where necessary.
Referring to multiple Supreme Court and High Court precedents, the Bench reiterated that “suppression” in the context of extended limitation must involve a positive and deliberate act intended to evade tax. Courts have consistently held that a mere omission cannot justify invocation of the extended limitation period in the absence of evidence of fraud, collusion, wilful misstatement or suppression. The Tribunal additionally observed that extended limitation cannot be triggered simply because the department discovered the alleged short-payment during audit, as this would effectively render the normal limitation period redundant.
Having found no evidence of intent to evade, the Tribunal concluded that the Commissioner (Appeals) had erred in sustaining the extended limitation. Consequently, the impugned order dated 6 November 2017 was set aside. The appeal filed by the developer was allowed, and the entire demand raised beyond the normal limitation period was held to be unenforceable.
Appearance
Counsel For Petitioner: Monish Panda and Anmol Jasal
Counsel For Respondent: Manoj Kumar, Authorized Representative
Cause Title: M/s. Omaxe for EST Spa & Hills Developers Limited Versus Commissioner, CGST
Case No: Service Tax Appeal No. 50383 Of 2018
Coram: Justice Dilip Gupta (President), P.V. Subba Rao (Technical Member)
