CESTAT Quashes Extended Service Tax & CENVAT Demand, says No Wilful Suppression Found, SCN Held Time-Barred [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside demands of service tax and Central Value Added Tax (CENVAT) credit raised against New Age Laminators Pvt. Ltd, holding that the extended period of limitation could not be invoked in the absence of wilful suppression, and declared the Show Cause Notice (SCN) was time-barred.

The assessee, engaged in the manufacture of High-Density Polyethylene (HDPE) and Polypropylene (PP) laminated paper bags, was audited by the Central Excise department, which observed that CENVAT credit of ₹1,16,924 had been wrongly availed and that service tax of ₹5,75,134 under reverse charge on commission paid to foreign agents between September 2013 and September 2014 had not been discharged.

On this basis, an SCN was issued, proposing recovery of the alleged inadmissible credit and unpaid service tax, along with interest and penalties under Rule 15 of the CENVAT Credit Rules, 2004 and Section 78 of the Finance Act, 1994.

The adjudicating authority confirmed the demands order, which was upheld by the Commissioner (Appeals). The assessee then appealed before the Tribunal.

The appellant argued that all commission payments were declared in shipping bills regularly submitted as proof of export, and that all excise returns were duly filed reflecting the credit availed.

Since the SCN was issued beyond the normal limitation period of one year, without any evidence of deliberate suppression or intent to evade, the extended period could not be invoked. It was also contended that the issue was revenue neutral, as input tax credit would have been available.

The Department contended that the disparities were revealed only during the audit and that the assessee had suppressed facts with the intent to evade payment of service.

The Tribunal rejected this contention, observing that “mere failure to declare does not amount to wilful suppression” and that suppression under the proviso to Section 73(1) must be deliberate and with intent to evade. The bench relied on the Supreme Court’s rulings, which held that suppression must be construed strictly, and omission without intent cannot justify extended limitation.

The Bench held that there was no deliberate act of suppression as the transactions were reflected in the appellant’s financial records and regularly filed returns, and the demand arose only upon audit scrutiny. Consequently, the SCN was declared barred by limitation.

Accordingly, the CESTAT Bench comprising Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) set aside the impugned order and allowed the appeal.

The assessee was represented by G.G. Gupta along with R.S. Sharma, while the Revenue was represented by S.K. Meena.

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