Invocation of Extended Limitation Period Without Evidence of Willful Misstatement: Calcutta HC Sets Aside AA's Order [Read Order]
The court agreed with the tribunal’s findings that the authority failed to provide proof beyond the assessee’s own records to justify the extended limitation.
Misstatemet – HC – TAXSCAN
Misstatemet – HC – TAXSCAN
The High Court of Calcutta set aside the adjudicating authority’s (AA) order for invoking the extended limitation period under Section 73(1) of the Finance Act,1994 without any evidence of willful misstatement or suppression of facts by the assessee.
The Revenue-appellant challenged the order dated 27.09.2024 passed by the Customs, Central Excise & Service Tax Appellate in Service Tax Appeal by filing an appeal under Section 35G of the Central Excise Act, 1944.
Electro Steel Casting Ltd, respondent-assessee, filed an appeal before the tribunal against the order dated 25.07.2014 passed by the Service Tax Commissionerate. The order had confirmed the service tax and CENVAT credit demands, along with interest and penalty. The Tribunal considered six issues in the appeal.
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The Court heard the counsel for both sides. It noted that the Revenue had challenged the Tribunal’s order only on two out of the six issues decided.
The appeal involved two main issues. First, there was an alleged short payment of ₹18,95,028 for the period from July 2011 to March 2012, where the realisation basis was used instead of the accrual basis as required under the Point of Taxation Rules. Second, there was an alleged short payment based on a mismatch between selected General Ledger codes and the income reported in the ST-3 returns.
The Tribunal regarding the first issue found that the adjudicating authority did not disagree with the reconciliation report submitted by the assessee. The Department failed to provide any other evidence, and only Rs. 18,128 was confirmed as payable under ‘Business Auxiliary Service,’ while the rest of the demand was dropped.
The adjudication order showed that the assessee received a show cause notice and responded. The authority appointed a chartered accountant under Section 72A to verify the issue. The special audit mainly focused on verifying the General Ledger codes, and the auditor’s report was submitted on 17.12.2013.
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The authority was required to examine the special audit report and explain if it disagreed with it but did not provide any reasons against the report. The Tribunal agreed that this was correct. Since the issue was factual, no major legal question arose.
The next issue was about a claimed short payment of tax due to a wrong comparison of some accounts with the income in the ST-3 returns. The special audit covered this. The Tribunal saw that the assessee gave a detailed report from a chartered accountant.
The Tribunal found no difference between the accounts and the returns. The authority did not give any decision on this. Since it was a factual matter, no legal question arose, and the Tribunal rejected the revenue’s claim.
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The division bench comprising Justice T.S Sivagnanam and Justice Chaitali Chatterjee leaving the two issues aside, looked at whether the adjudicating authority was right to use the extended limitation period under Section 73(1). The authority needed to prove that the assessee willfully suppressed facts or gave wrong information to avoid tax. However, the authority only quoted the law and did not provide any proof of this.
Because of this, the High court said the extended limitation period could not be applied. The authority relied only on the assessee’s own records and returns, without any outside evidence.
The court found no proof that the assessee willfully suppressed facts or tried to evade tax. So, it set aside the entire order by the authority and agreed with the tribunal’s decision.
Therefore the appeal was dismissed.
To Read the full text of the Order CLICK HERE
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