Pranav B Prem

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi has set aside a service tax demand raised on car parking charges collected by M/s Omaxe Buildhome Ltd., holding that the Department was not justified in invoking the extended period of limitation in the absence of clear evidence of suppression of facts with intent to evade tax. The Tribunal ruled that extended limitation under the proviso to Section 73(1) of the Finance Act, 1994 cannot be triggered merely because the assessee failed to pay tax or contravened provisions of the statute, unless such failure was accompanied by deliberate intent to evade tax. The ruling came from a Division Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member), which allowed the appeal and quashed the demand.

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Omaxe Buildhome Ltd., a developer of residential complexes, had been collecting Basic Sale Price (BSP), Preferential Location Charges (PLC), and car parking charges from homebuyers. The developer discharged service tax on BSP and PLC but did not pay service tax on car parking charges for the period from July 2010 to June 2012, contending that car parking charges were not taxable under “construction of complex services” prior to the introduction of the negative list regime in July 2012. Audit authorities later objected to this treatment and a show cause notice was issued demanding ₹31,00,813 as service tax along with equivalent penalty under Section 78, invoking the extended limitation period of five years. The adjudicating authority confirmed the demand and the Commissioner (Appeals) upheld it, leading to the present appeal before the Tribunal.

The Tribunal observed that the show cause notice invoked extended limitation solely by alleging suppression of facts and contravention of statute, but it did not demonstrate evidence of deliberate intent to evade service tax. The Bench noted that for the extended period to apply, the law requires the Revenue to prove fraud, collusion, wilful misstatement, or suppression of facts with intent to evade tax, and that these elements cannot be presumed simply because tax was not paid. The Tribunal referred to the judgments of the Supreme Court in Pushpam Pharmaceutical Co., Anand Nishikawa Company Ltd., Uniworth Textiles Ltd., and Continental Foundation Joint Venture, reiterating that “suppression” must be deliberate and motivated by the desire to avoid tax liability. The Delhi High Court’s decision in Bharat Hotels Ltd. was also cited for the proposition that mere failure to disclose a receipt or liability in return filings does not amount to suppression unless accompanied by intent to evade tax.

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The Tribunal highlighted that the issue of taxability of car parking charges during the relevant period was interpretational in nature, arising from the applicability of “construction of complex services” under Section 65(105)(zzzh), and the assessee had acted on a bona fide belief. It emphasised that a wrong interpretation or misreading of the scope of levy cannot automatically be equated with wilful intent to evade. The Bench further remarked that in a self-assessment regime, tax officers have a statutory duty to scrutinise returns, and the Department cannot bypass its own responsibility and later allege suppression when facts were fully available in the assessee’s records. The Tribunal relied on its earlier rulings in Raydean Industries, Sunshine Steel Industries, G.D. Goenka, and India Glycols Ltd., observing that audits uncovering non-payment do not by themselves justify invocation of the extended limitation, as the proper course in such situations is to issue a demand within the normal period.

The Tribunal also disapproved of the Commissioner (Appeals)’ reasoning that failure to pay tax automatically evidenced intent to evade. It reiterated that extended limitation is an exception and must be strictly construed, and the burden lies on the Revenue to prove intent. Since the Department failed to establish any deliberate concealment or conduct on the part of Omaxe Buildhome Ltd. intended to evade tax, the foundational requirement for invoking the extended period was not fulfilled.

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Consequently, the Tribunal held that the extended period of limitation had been wrongly invoked and that the demand of service tax, interest, and penalties could not be sustained. The impugned order dated 22.12.2017 was set aside in entirety, and the appeal was allowed.

Appearance

For the Appellant/Assessee: Shri Monish Panda and Shri Anmol Jasal

For the Department: Shri Manoj Kumar

Cause Title: M/s Omaxe Buildhome Limited vs. Commissioner of GST Delhi-East

Case No: Service Tax Appeal No. 50776 of 2018

Coram: Justice Dilip Gupta (President), P.V. Subba Rao (Technical Member)