In a recent decision, the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT BB) in Bangalore quashed an order issued under extended limitation for the recovery of service tax from one assessee, Synergy Computer Education, a training institute operated by Vasundhara A.G.K, observing that mere non-payment of service tax is not “suppression of fact” to justify the invocation of an extended limitation period for tax recovery.
The assessee entered into an agreement with Bruhat Bangalore Mahanagara Palike (BBMP) to offer computer training to underprivileged youth, particularly those from Scheduled Castes, Scheduled Tribes, and minority communities. This training initiative aimed to empower unemployed youth by providing vocational skills. Under the agreement, both the assessee and BBMP shared the infrastructure costs for the program, with the institute receiving a payment of Rs. 3,500 per participant.
However, the tax authorities contended that this training service fell under the taxable category of “Commercial Training or Coaching Services,” per Section 65(105)(zzc) of the Finance Act, 1994, and issued a show cause notice. In response, the assessee appealed, asserting that the service provided was a government-sponsored social initiative and not a commercial activity intended for profit. Furthermore, the assessee argued that the extended limitation period was improperly invoked, as there was no suppression of facts with intent to evade tax.
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During the hearing, the assessee’s counsel cited prior judgments, including the Supreme Court’s decision in Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut, which clarified that non-disclosure alone does not equate to suppression unless it is accompanied by deliberate deception or intent to mislead tax authorities. The counsel argued that the assessee’s training services, being part of a government-approved initiative, did not involve any intent to evade tax, as the agreement and financial details were transparent and aligned with a non-commercial purpose.
The Tribunal bench comprising Mr PA Augustian and Mr Pullela Nageswara Rao, after reviewing the case details, upheld the assessee’s position, observing that the mere failure to pay service tax did not constitute suppression of facts.
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CESTAT thus quashed the extended limitation order, invalidating the demand for tax recovery for periods beyond the standard limitation. The Tribunal directed the adjudication authority to reassess and compute any potential liability only for the normal limitation period. Additionally, penalties levied under Sections 76 and 78 of the Finance Act were dismissed. The case was remanded to the adjudication authority to determine the service tax due within the standard period, with the assessee receiving consequential relief as permitted by law.
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