The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has ruled that a time-barred Show Cause Notice ( SCN ) invalidates the confirmation of a service demand proposed therein.
The tribunal noted that while Central Excise Officers have the authority to scrutinize returns and conduct best-judgment assessments, if detailed scrutiny is not performed as per the Central Board of Indirect Taxes and Customs ( CBIC ) instructions, the resulting revenue loss is a calculated risk taken by the Board. In such cases, neither the assessee nor the officer is deemed accountable for the revenue shortfall.
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The bench further clarified that the extended limitation period can only be invoked if there is clear evidence of fraud, collusion, willful misstatement, suppression of facts, or violation of rules with intent to evade tax. Intentional suppression cannot be assumed merely because the appellant operated under self-assessment, disagreed with audit findings, claimed CENVAT credit eligibility, or failed to seek clarification from the Revenue.
The case involved an appellant engaged in manufacturing HDPE and PP Laminated Paper bags. During an audit, Central Excise officers observed that the appellant had wrongly availed CENVAT credit on expenses related to vehicle repair, maintenance, insurance, and hotel services. Consequently, an SCN was issued to recover the inadmissible credit.
The appellant argued that the disputed period, from September 2013 to September 2014, rendered the SCN issued on January 6, 2017, time-barred. They contended that the extended limitation period was inapplicable due to the absence of suppression or intent to evade tax.
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The bench, comprising Judicial Member Rachna Gupta and Technical Member Hemambika R. Priya reiterated the obligation of the Central Excise Officer to scrutinize filed returns, conduct necessary assessments under Section 72, and issue an SCN under Section 73 within the prescribed time limit. Failure to do so, leading to any tax escaping assessment, places the responsibility squarely on the officer.
The tribunal, agreeing with the appellant, set aside the SCN and the corresponding order, thereby allowing the appeal.
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