The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has stated that the department cannot invoke the extended period of limitation merely because the returns were self-assessed. The Tribunal concluded that the show cause notice only asserts that the assessee violated several provisions of the Finance Act and the Rules in order to avoid paying service tax because the assessee failed to disclose the correct value of taxable services in the ST-3 returns, allowing the payment of service tax totaling Rs. 2,40,96,546 to evade assessment.
The assessee, Wellworth Project Developers Private Limited, claimed to have paid service tax on the construction services it provided for commercial and industrial buildings. According to the assessee, it used the reverse charge mechanism to fulfill its service tax obligation on advance revenues for legal and construction services.
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A show-cause notice requesting for service tax was sent out in compliance with Section 73(1) of the Finance Act. The assessee contended that the demand was unsustainable on its own and that the extended statute of limitations could not have been applied in this particular circumstance. However, the Commissioner rejected the assessee’s argument, noting that the department places trust in an assessee through the self-assessment scheme and that, as a result, filing false returns and failing to disclose the true value of services rendered would amount to willful suppression of facts. The assessee appealed the Commissioner’s judgment to the Tribunal because they were unhappy with it.
The assessee argued that not only was the demand unsustainable on its own merits, but the case’s facts and circumstances precluded the use of the longer term of limitation. Additionally, the demand for service tax on customer advances was incorrectly calculated using the closing balance of the advance received, and the demand for service tax on professional and legal services is unjustified because it pertains to the services of chartered accountants and advocates.
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The assessee had not concealed facts, much less done so with the intention of avoiding payment of service, the Tribunal noted. Additionally, the assessee noted that no specific accusations of mala fide intent to withhold information had been mentioned in the show cause notice.
According to the two-member bench consisting of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member), “the proviso to section 73(1) of the Finance Act does not allow for the extended period of limitation to be invoked by merely suppressing facts.” The show-cause notice must explicitly state the reason why the assessee concealed information in order to avoid paying service tax, as the suppression must be done with the intention of avoiding payment of service tax.
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The Tribunal concluded that the show cause notice only asserts that the assessee violated several provisions of the Finance Act and the Rules in order to avoid paying service tax because the assessee failed to disclose the correct value of taxable services in the ST-3 returns, allowing the payment of service tax totaling Rs. 2,40,96,546 to evade assessment.
The Tribunal has consistently maintained that the appropriate officer can always ask the asseessee for information, even under the self-assessment scheme, and that it is the responsibility of the appropriate officer to carefully examine whether the duty assessed by the asseessee is correct. The mere fact that the returns were self-assessed does not allow the department to claim the longer period of limitation. Since the appropriate officer may have discovered the facts, the Commissioner erred in ruling that the extended period of limitation could be used if the department learned of them during an investigation.
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