Service Tax not paid due to confusion about Nature and Taxability of Services, Demand for extended Period of Limitation not permissible: CESTAT [Read Order]

The Delhi bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax was not paid due to confusion about the nature and taxability of services, Demand for extended period of limitation is not permissible

Mr Bipin Garg, Ms Kainaat & Ms Shalini, Advocates appeared for the Appellant and Mr Mahesh Bhardwaj, Authorised Representative for the Respondent.

A specific intelligence was gathered by the Officers of DGGI about Dinesh Chandra Dubey, the appellants to have received the commission from M/s. M/s. Adarsh Credit Co-operative Society Ltd (ACCSL) instead of providing “Business Auxiliary Services” is being provided to said M/s. ACCSL.  But the service tax was not being paid by the appellants on the amount of the said commission received. 

The department observed that appellants have received the respective commission from M/s. ACCSL for the respective periods as mentioned in the table above for providing ‘Business Auxiliary Services’.  Though services are taxable post the appellants have not discharged their service tax liability.  The appellants herein were served with the respective show cause notices, proposing the recovery of the respective amount of service tax along with interest and the appropriate penalties.

The said proposal was confirmed by both the adjudicating authorities except for some benefit of exemption for a particular period, vide the respective orders in each of these appeals. The appellants stated that there was much of confusion about the nature of the services being provided by the appellants as far as the taxability thereof was confirmed. 

The confusion continued due to which the appellants were under bona fide belief that the service tax does not apply to the services provided by them.  The strong reason for such belief is mentioned to be the agents of LIC of India who were also not paying any service tax for providing the services to LIC against receiving commission from LIC. 

Suppression means failure to disclose full information with the intent to evade payment of duty.  When the facts are known to both parties, omission by one party to do what he might have done would not render it suppression.  When the Revenue invokes the extended period of limitation under Section 73(1) of the Finance Act, 1994 the burden is cast upon it to prove suppression of fact. 

It was evident that mensrea/the intent to evade the tax liability is the core for invoking the extended period over the normal period.  Appellants have mentioned themselves to be under the bona fide belief of still not being liable under service tax. 

The reason for such bona fide belief stands corroborated by the fact that the service tax was neither collected by them from M/s.  ACCSL nor accordingly was paid by the appellant. 

The CESTAT observed that since there was the scope and belief with the appellants for entertaining the doubt about no liability of theirs to pay the service tax that the application of Section 73(1) of the Finance Act, 1994 the proviso thereof gets ruled out and resultantly, the extended period of limitation is held to have wrongly invoked by the department.

The CESTAT bench consisting of Dr Rachna Gupta, member (judicial) while setting aside has held that” the adjudicating authorities below have wrongly confirmed the demand for the extended period of limitation.

To Read the full text of the Order CLICK HERE

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