CESTAT quashes Show Cause Notice issued after 5 Years [Read Order]

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The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai, set aside the order of the Commissioner of Appeals, stating that show cause notice issued after expiry of 5 years would be barred by limitation.

The Tribunal quoted the cases, CCE, Ahmedabad-I Vs. M. Square Chemical reported in 2008 (231) ELT 194 (SC) and Ilavia Enterprises Vs. CCE, Jaipur reported in 1997 (91) ELT 26 (SC) to support the Ruling.

The Ruling was made in the case of M/s Aviat Health Care Pvt. Ltd. v. Commissioner of CGST, Belapur. During the EA-2000 audit, the appellant, a manufacturer, and trader of pharmaceutical products was found rendering exempted services during the year 2008-2009. The appellant was also found not maintaining a separate account as provided in the Rule. A show cause notice was issued for recovery along with interest and proportionate penalty. The matter was adjudicated upon, and the duty demand along with interest was confirmed by the Assistant Commissioner, Service Tax, and further confirmed by the Commissioner (Appeals).

The Counsel for the appellant argued that show-cause notice was issued even after the extended period of 5 years of limitation was over as the duty demand for trading activity relates to the financial year 2008-09 and the show-cause notice was issued on 22.04.2014. The appellant also argued that no allegation concerning the suppression of facts with the intent to evade duty was made against the appellant even to invoke an extended period and trading being held as not a service.

However, the Revenue argued that the date of filing of Service Tax return is supposed to be taken into consideration for computation as per provision contained in Section 73(6) for the Finance Act, 1994. The Revenue further contended that since the ST-3 return copy submitted by the appellant indicates that ST-3 return for the disputed period was filed on 22.04.2009, the show-cause notice was well issued within the period of limitation.

The Tribunal ruled that the show-cause notice issued is barred by the period of limitation as it was issued after the stipulated period. The Tribunal also noted that the “extended period can only be invocable under certain contingency primarily when appellant-assessee intended to evade payment of tax”.

The Tribunal also criticized the Officials observing that since no evidence of fraud, collusion, willful misstatement, suppression of fact or contravention of the provision of the Finance Act or Rule was found, what could have prompted the Officials to go beyond the statutorily prescribed 18 months.

The Tribunal also observed that “the respondent-department can travel only backward from the current assessment to the past period and not like the audit people who usually move forward from the year the last audit was closed up to the current assessment/ financial year”.

The Tribunal also quoted Medisary Laboratories P. Ltd. Vs. CCGST, Kolhapur vide final Order No. A/87803/2018 dated 01.11.2018 and observed that “‘trading’ is a pure sale which is subjected to the taxable jurisdiction of the provisional Government and no Service Tax liability accrues from pure sale un-associated with any service component”.

The decision was made by a single bench of the Tribunal consisting of Hon’ble Dr. Suvendu Kumar Pati, Member (Judicial).

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