The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad, has held that the demand of Service Tax for an extended period of limitation is unsustainable without the evidence of Fraud, Collusion, Wilful Misstatement, Suppression of facts and Intention to evade payment of tax.
The issue relates to whether the assessee, a sub-contractor, was liable to pay service tax when the main contractor had already discharged the liability on the full contract value and whether the extended period of limitation can be invoked in respect of such a demand.
The assessee Thakarshi J Likhiya being the appellant, was represented by Shri Amal Presh Dave.
The assessee contended that the demand for Service tax was beyond the normal period of limitation and not sustainable.
The assessee stated that it was in a bona fide belief, supported by various circulars issued by the Board, that there was no liability to pay service tax as the matter was under litigation and finally settled by the Larger Bench in the case of M/s. Melange Developers Pvt. Limited.
The assessee emphasized that there was no revenue loss to the government exchequer as the main contractor had already paid service tax on the total contract value, which included the sub-contractor’s services.
The assessee also cited several judgments, including Laxmi Engineering P. Limited, Sharma Decorators, Shanti Construction Co, Heena Enterprises and MK Enterprise, and a previous order of CESTAT Ahmedabad in the case of assessee M/s. Thakarshi J Likhiya, to support his argument.
The Revenue, Commissioner of Central Excise & Service Tax, represented by Shri Ajay Kumar Samota reiterated the findings of the order and argued that the assessee’s failure to obtain service tax registration during the relevant period indicated a malafide intention to evade payment of tax and hence contended that the extended period of limitation was rightly invoked.
The bench clarified that the extended period of limitation is applicable only if there is evidence of Fraud, Collusion, Wilful misstatement, Suppression of facts and Intention to evade payment of tax.
The bench noted that the main contractor had already paid the entire service tax liability, which included the sub-contractor’s services, resulting in a revenue-neutral situation.
The bench also highlighted the contradictory circulars issued by the Board and the ongoing litigation regarding the sub-contractor’s liability.
The bench referred to the Larger Bench’s decision in the case of Melange Developers Pvt. Limited, which concluded that the sub-contractor was indeed liable to pay service tax.
The bench stated that it found no malafide intent on the part of the assessee and there is no contravention of any of the provisions of the Finance Act, 1994 on the part of the assessee.
The two-member bench comprising of Mr. Ramesh Nair (Judicial Member) and Mr. C.L. Mahar (Technical Member) held that the demand for service tax, although meritorious, was barred by the limitation period and therefore not sustainable since the larger period of limitation cannot apply.
The bench thus set aside the order and allowed the appeal in favour of the assessee thus establishing the importance of the limitation period.
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