Extended period Limitation not applicable When Assessee paid Service Tax Along With Interest: CESTAT [Read Order]

The Tribunal observed that once the demand is not found sustainable on merits, the question of imposition of penalty under Section 78 does not arise.
Extended period Limitation - Assessee - Service Tax - CESTAT - taxscan

The Chandigarh bench of  Customs, Excise And Service Tax Appellate Tribunal (CESTAT) has held that extended period limitation is not applicable when the assessee paid service tax along with interest.

M/s Jaypee Sports International Ltd. (“JSIL”) was the owner of a motor racing circuit.  Acting on the intelligence developed by the officers of DGCEI, Delhi Zonal Unit, R. K. Puram, New Delhi that JSIL had not discharged their service tax liability in connection with the Formula 1 Grand Prix of India (“F-1 Race”) held at Buddha International Circuit, a team of Officers visited the office of JSIL on 03.11.2011.

During the visit, JSIL by its letter dated 03.11.2011 submitted various documents such as copies of Service Tax returns, Annual Audited statements, Organisation Agreement dated 20.01.2011, Race Promotion Contract dated 13.09.2011, Service Agreement dated 13.09.2011, Artwork Agreement dated 13.09.2011, invoice dated 23.09.2011 for US$ 40,124,120.26, confirmation letter dated 03.11.2011 of Banker regarding remittance to Formula One World Championship Ltd. (“FOWC”) and other related documents.

Mr. R. S. Kuchhal, Authorized Signatory of JSIL was recorded on 03.11.2011 to the effect that payment of US$ 40,124,120.26 has been made to FOWC for acquiring the right to host, stage and promote the F-1 Race, 2011. Mr R. S. Kuchhal also informed that a payment of US$ 40,124,120.26 was made to FOWC under the Rent Promotion Contract dated 13.09.2011, payment of US$ 20,00,00 was made to Formula One Management Ltd. (“FOM”) under the Service Agreement dated 13.09.2011, on which service tax amounting to Rs.1,34,68,358/- was deposited on 06.02.2012 under the category of “Business Support Services”.

Show Cause Notice was issued by the Additional Director General, DGCEI alleging that FOWC had transferred representational rights to JSIL to host, stage and promote F-1 Race in India, which constitutes “Franchise Service” as defined under Section 65(105)(ze) and since FOWC has no office in India, hence the JSIL being recipient of service, is liable to pay service tax on such services. The show cause notice also alleged that the services provided by FOM to JSIL under the Service Agreement are “Business Support Services”, receipt of which within India qualify as “import of service” and accordingly JSIL is liable to pay tax on such services under reverse charge mechanism. The show cause notice also invoked an extended period of limitation alleging suppression

The Event took place on 31.10.2011 and the Officers conducted a visit on 03.11.2011 on the same date all the agreements, invoices etc. were made available to the revenue. Return for the period Oct 2010 to March 2011 was filed on 20.04.2012 not admitting any tax liability but the show cause notice was issued only on 15.07.2014 alleging suppression of facts. The fact that the entire facts were known to the revenue even before filing of return wherein no tax liability was admitted and in the absence of any other positive act on the part of JSIL to deliberately suppress correct information with the intent to evade payment of tax. In these facts, the invocation of an extended period of limitation cannot be sustained in view of the dicta laid down in Padmini Products Limited v. CCE (1989) and Pushpam Pharmaceuticals Company v. CCE (1995).

A two-member bench comprising Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) observed that once the demand of Rs.20,36,32,619/- is not found sustainable on merits, the question of imposition of penalty under Section 78 does not arise. The penalty of Rs.1,12,23,633/- is also not sustainable in view of Explanation 2 to Section 73(3), which provides that no penalty is to be imposed when short-paid service tax is deposited along with interest before the issuance of show cause notice. The demand is not sustainable on merits, the imposition of penalty under Section 77 and demand of interest is also not sustainable. 

While allowing the appeal, the Tribunal set aside the demand of service tax to the extent of Rs.20,36,32,619/-, penalty imposed under Sections 78 and 77 and demand of interest cannot be sustained.

Shri Nishant Mishra appeared for the Appellant and Shri Sarweshwar T. Khairnar, Authorized Representative for the Respondent.

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