The Karnataka High Court recently held that omission to reply to the first Show-Cause Notice (SCN) issued to an Assessee by the Revenue Department does not constitute malintent to suppress facts in a means to evade payment of Service Tax.
The High Court provided the above explanation while adjudging a Central Excise Appeal filed by the Principal Commissioner of Central Tax against Order of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) ruling in favour of the Respondent Assessee, Adarsh Developers.
The factual matrix began with a SCN dated 02.07.2007 that was served upon the Assessee calling for documents from the period between 16.06.2005 to 31.12.2006. The Revenue Department subsequently confirmed the contents of the SCN via order dated 31.01.2011.
The SCN upon being contested by the Assessee before the Appellate Tribunal was quashed by the Tribunal affirming that the Assessee was not required to pay service tax for all of the construction service conducted by the Assessee before 01.07.2010.
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The Assessee was called upon by the Office of Commissioner of Service Tax, Service Tax Commensurate, Bangalore to furnish balance sheets among other particulars, for the period from 2007-08 to 2011-12 vide SCN dated 19.10.2012.
Thereafter, the Assessee was subject to Order of Commissioner Of Service Tax holding that “the Assessee had suppressed facts with intent to evade payment of service tax within the meaning as provided under the proviso to Section 73(1) of the Finance Act, 1973 and further it was held that the assessee is liable to pay applicable interest on the service tax payable for the said periods”.
The Order by the Commissioner of Service Tax was quashed by CESTAT in appeal, leading to the present Appeal under Section 35G of the Central Excise Act, 1994. The Revenue Department asserted that the Assessee has attempted to suppress facts regarding the tax amounts to be paid for the aforementioned periods leading to the issuance of the subsequent show-cause notices.
The Division Bench of the Karnataka High Court comprising Justice S.G. Pandit and Justice C.M. Poonacha concurred with the order of the CESTAT and referred to the decision of the Supreme Court in Nizam Sugar Factory Vs CCE (2008), where it was held that the Department was aware of all the transactions and activities of the Assessee Company during the disputed Assessment Year while issuing the first SCN itself, therefore, the subsequent SCNs do not prove suppression of facts by the Appellant.
In light of the settled position of Law laid down by the Apex Court in Nizam Sugar Factory, the Karnataka High Court dismissed the present Appeal,ruling in favour of the Assessee and against the Department.
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