The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Delhi Bench while granting the partial relief to Oriental Insurance Company Limited ruled that the extended period of limitation could not be invoked if there was no suppression & misrepresentation of facts.
The appellant, Oriental Insurance Company Limited is a registered insurer under the provisions of the Insurance Act, 1938 and is engaged in providing general insurance services. The appellant is also registered with the Service Tax Department.
A show cause notice was, however, issued to the appellant alleging that there was a delay in payment of service tax by the appellant as it paid service tax after receipt of matrixes from GIC. The extended period of limitation, as contemplated under the first provision to section 73(1) of the Finance Act was also invoked.
The Commissioner has imposed penalty under section 78 of the Finance Act for the reason that the appellant had deliberately suppressed or had not disclosed the material fact of non-payment of service tax on retrocession premium, excess of loss premium and foreign cession of the excess of loss premium related to terrorism reinsurance services with an intention to evade payment of service tax.
The appellant submitted that it is impossible for the appellant to pay service tax on monthly basis before receipt of matrix, as it does not know the consideration receivable by it from respective member companies. Till then, as the identification of another person and consideration‘ is not possible, it cannot be said that the appellant provided any service‘ in terms of section 65B(44) of the Finance Act.
The appellant urged that in the absence of any delay in payment of service tax by the appellant, the confirmation of demand of interest is not sustainable and the same is liable to be set aside. The extended period of limitation could not have been invoked and so the demand of interest for the period upto March 2013 is time-barred. It has been accepted by the Adjudicating Authority in the impugned order that there was no malafide intention on the part of the appellant. It has, however, been held that the failure of the appellant to show these amounts in its ST-3 returns for the relevant period would amount to suppression of facts.
The Authorized Representative of the Department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. Learned Authorized Representative also submitted that in the facts and circumstances of the case, interest was rightly imposed upon the appellant under section 75 of the Finance Act and the extended period of limitation was correctly invoked in the present case.
The coram headed by the President, Justice Dilip Gupta held that the suppression of facts was not willful nor was there any intent to evade payment of service tax. Thus, for all the reasons stated while dealing with the extended period of limitation, a penalty under section 78 of the Finance Act could not have been imposed upon the appellant. The Commissioner was, therefore, not justified in imposing a penalty under section 78 of the Finance Act as there was no deliberate suppression of facts with the intention to evade payment of service tax.