CESTAT Sets Aside Service Tax Demand as Extended Limitation Not Sustainable

CESTAT Sets Aside Service Tax Demand as Extended Limitation Not Sustainable

Introduction

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the appeal of Oswal Cargo Movers, setting aside the demand of service tax, interest, and penalty. The Tribunal held that the invocation of the extended limitation under Section 73(1) of the Finance Act, 1994 was unsustainable in the absence of suppression of facts or intent to evade tax.

Factual Background

The appellant, Oswal Cargo Movers, was engaged in providing cargo handling services. The Department issued a Show Cause Notice (SCN) dated 05.10.2012, alleging that the appellant was wrongly classifying its services as "transportation of goods by road service" instead of "cargo handling service," thereby evading service tax. The SCN invoked the extended period of limitation to demand tax.

Procedural History

The Commissioner confirmed the demand of service tax along with interest and penalty by invoking Section 73(1), on the ground that the assessee had failed to discharge its tax liability on taxable receipts. Aggrieved, the assessee filed an appeal before the Tribunal.

Contentions

• Assessee’s Contention: The appellant argued that all receipts were duly recorded in the books of accounts and available for verification by the Department. There was no suppression, misstatement, or intent to evade tax. The extended period of limitation could not have been invoked, as judicial precedents require deliberate intent for its application.
• Department’s Contention: The Department maintained that the assessee had failed to discharge service tax on taxable receipts, justifying invocation of the extended limitation.

Tribunal’s Reasoning

The Bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) noted that the Department had produced no evidence of suppression or intent to evade. The Tribunal emphasized that mere non-payment of tax is not sufficient to invoke the extended limitation. Since the normal limitation period had expired, the SCN based solely on extended limitation could not be sustained.

Outcome

The Tribunal allowed the appeal, set aside the demand of service tax, interest, and penalty, and held that the invocation of the extended period under Section 73(1) was not justified.

Significance

The decision reinforces that extended limitation under Section 73(1) is an exceptional remedy available only when there is deliberate fraud, collusion, or intent to evade. Authorities cannot invoke it merely because of non-payment or wrong classification.

Representation

In this case the appellant was represented by Mr. B. L. Narsimahan along with Mr. Ashutosh Choudhary, Advocates. Meanwhile the respondent was represented by Mr. Aejaz Ahmad, Advocate.