No New Evidence Justifies Invoking Extended Limitation for alleged Short Service Tax Paid: CESTAT quashes Order [Read Order]

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) quashed a Service Tax demand citing that there was no new evidence justifying the use of an extended limitation period for the alleged short payment of Service Tax.

Skyline Web Solutions Pvt. Ltd., the appellant, a construction company in Kolkata, was issued a Show Cause Notice in September 2019. The tax authorities alleged that the company Short paid Rs. 22,10,162 in Service Tax related to "construction of residential complex services" for the period 2013-2017.

Boost Your Business with SME IPO Funding Strategies - Enroll Now

The tax authorities made three primary claims Rs. 4.68 lakh for underpaid Service Tax on advances received from customers, Rs. 8.48 lakh for Service Tax on construction portions allotted to landowners, and Rs. 8.72 lakh for Service Tax related to the Siliguri project.

Aggrieved, the appellant appealed before the Commissioner (Appeals) who dropped the Rs. 8.48 lakh demand concerning the landowner’s portion but upheld demands related to customer advances and the Siliguri project.

The appellant challenged the Commissioner (Appeals)’s order before the CESTAT arguing that all relevant financial data, including Balance Sheets and reconciliation statements, had been openly shared with the tax department. They claimed that there was no attempt to hide information.

Boost Your Business with SME IPO Funding Strategies - Enroll Now

The appellant’s counsel argued that the Show Cause Notice was beyond the thirty-month statutory limitation period. Their returns were filed in early 2017, making the 2019 notice invalid.

On the other hand, the department argued that the appellant had failed to file its ST-3 Return in time leading to delays that justified using the extended period for tax demands, and some advances received were not adequately disclosed in earlier tax filings.

The two-member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) noted that the appellant had voluntarily provided all the data that the tax demands were based on, indicating no intent to evade taxes.

Boost Your Business with SME IPO Funding Strategies - Enroll Now

The tribunal observed that the Show Cause Notice issued beyond the permissible period was considered time-barred. The tribunal found that the Department had not brought any evidence on record to establish the intention to evade payment of tax.

The Tribunal cited a previous ruling in Maa Kalika Transport Pvt. Ltd. where a similar situation led to a decision favoring the taxpayer, stating that unclear classifications within the department do not warrant extended periods.

Therefore, the tribunal quashed the Service Tax demand notice and the appeal of the appellant was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates