Extended Period Of Limitation Can’t Be Invoked In Absence Of Suppression Of Fact With Tax Evasion Intention, Rules CESTAT
Pranav B Prem
In a significant ruling reaffirming settled legal principles on limitation, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, has held that the extended period of limitation under Section 73(1) of the Finance Act, 1994, cannot be invoked in the absence of deliberate suppression of facts with intent to evade payment of service tax. The Tribunal emphasized that mere failure to comply with procedural norms does not constitute wilful suppression unless coupled with fraudulent or intentional conduct.
The bench comprising Ms. Binu Tamta (Judicial Member) and Ms. Hemambika R. Priya (Technical Member) partially allowed the appeal filed by Imperia Structure Limited, limiting the tax demand to the normal period of limitation and setting aside the penalty imposed under Section 78 of the Finance Act.
Background
Imperia Structure Limited, a construction company, was engaged in providing various taxable services, including Commercial or Industrial Construction, Construction of Residential Complexes, Maintenance & Repair, and Preferential Location Services, among others. The issue in dispute arose from the company's simultaneous availing of abatement under Notification No. 1/2006-ST dated 01.03.2006 and CENVAT credit of input services during Financial Years 2010–11 and 2011–12.
The Department conducted an audit and issued a Show Cause Notice on 11.12.2013, proposing to recover ₹1,21,32,851, contending that the assessee had wrongly availed abatement under the 2006 notification while also taking CENVAT credit in violation of the notification’s conditions and Rule 6 of the CENVAT Credit Rules, 2004.
The Adjudicating Authority, by order dated 02.03.2017, confirmed the demand and imposed interest and equal penalty. This was upheld by the Commissioner (Appeals), leading to the present appeal before the Tribunal.
Appellant’s Submissions
The appellant contended that it had availed CENVAT credit on input services such as security, legal consultancy, and engineering services which were used across the organization and not linked exclusively to services on which abatement was claimed. It was argued that these services were general business inputs, falling under Rule 6(5) of the CENVAT Credit Rules, and were not subject to denial of credit unless used exclusively for exempted services.
The appellant further stated that all relevant information was duly disclosed in their ST-3 returns, and the Department's demand arose purely from audit scrutiny. Therefore, no suppression of facts or intent to evade tax could be alleged, and the invocation of the extended period of limitation was unjustified.
Department’s Contentions
The Revenue argued that the appellant had failed to maintain separate accounts for taxable and exempted services as required under Rule 6(2) of the CENVAT Rules and had availed abatement in violation of the 2006 Notification, which expressly prohibits CENVAT credit on inputs/input services where abatement is claimed.
The Department maintained that the simultaneous availing of credit and abatement was a deliberate act of suppression, and the extended limitation period was rightly invoked. Penalty under Section 78 was also justified, as the appellant had acted in contravention of mandatory provisions.
Tribunal’s Observations and Analysis
The Tribunal noted that abatement under Notification No. 1/2006-ST is conditional and cannot be claimed when CENVAT credit on input services is also availed. Therefore, for the year 2010–2011, the assessee's action of availing both abatement and credit was impermissible, and the demand to that extent was justified.
However, on the issue of limitation, the Tribunal distinguished between procedural lapses and wilful suppression. Referring to the decisions in Pushpam Pharmaceuticals Co. V. CCE, Bombay [1995 (78) E.L.T. 401 (SC)] and Anand Nishikawa Co. Ltd. v. CCE [2005 (188) E.L.T. 149 (SC)], the bench reaffirmed that: “Suppression of facts must be deliberate and coupled with intent to evade payment of duty. Mere non-disclosure or procedural non-compliance, without intent, is insufficient to invoke extended limitation.”
The Tribunal recorded that all relevant transactions were disclosed in ST-3 returns, and the demand was raised only after a post-facto audit. There was no evidence of fraud, collusion, or wilful default. Hence, it held that: “In the absence of any intention to evade payment of service tax, which should be evident from the material on record or conduct of the appellant, the extended period of limitation cannot be invoked.” As a result, penalty under Section 78 was also set aside on the same reasoning.
Final Order
The Tribunal concluded by holding that the demand for the period within the normal limitation under Section 73(1) was sustainable but quashed the demand for the extended period, along with the penalty. The operative portion of the order states: “In view of the above discussions, the demand is upheld for the normal period only. The appeal is allowed to the extent indicated above and the impugned order is upheld partially.”
Appearance
Present for the Appellant: Shri Atul Gupta, Shri Varun Gaba, Advocates
Present for the Respondent: Shri Rajeev Kapoor, Authorized Representative
Cause Title: Imperia Structure Limited V. Commissioner of Central Goods, Service Tax and Central Excise
Case No: Service Tax Appeal No. 50719 of 2018
Coram: Hon’ble Ms. Binu Tamta [ Member (Judicial)], Hon’ble Ms. Hemambika R. Priya [Member (Technical)]
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