Extended Period Not Invocable when Department Previously Audited and Issued SCN: CESTAT [Read Order]
CESTAT held that the extended period of limitation cannot be invoked when the department had previously audited the assessee and issued a SCN covering the same period
Department Previously Audited and Issued SCN
Department Previously Audited and Issued SCN
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the extended period of limitation could not be invoked when the department had already conducted an earlier audit and issued a show cause notice (SCN) covering a part of the same period.
Bridgeview Broadband Network Pvt. Ltd., the appellant, is a company engaged in providing internet services through leased cable networks and also in leasing out Dark Optical Fibre to telecom companies.
During an audit conducted in November 2011, the department found discrepancies between the income reported in the balance sheets and the values declared in the ST-3 returns. Based on this, an SCN dated 27.08.2012 was issued demanding service tax of Rs. 1,05,64,177 for the period 2007-08 to 2011-12, along with interest and penalty. The notice also proposed denial of CENVAT credit amounting to Rs. 39,13,281, citing non-submission of invoices.
In the Order-in-Original dated 14.07.2014, the adjudicating authority confirmed part of the demand, amounting to Rs. 76,06,742, and dropped the remaining amount related to infrastructure receipts, holding that the extended period could not be applied to that component because the department had been aware of it during earlier proceedings.
The appellant’s counsel argued that service tax was not payable on various heads such as lease pay holder receipts, channel placement charges, infrastructure leasing, and installation services.
They further argued that a previous audit had already led to an SCN in 2009 covering similar transactions for the overlapping period 2003-04 to 2007-08, and that the department did not raise these issues then. The appellant argued that it had a bona fide belief that service tax was not applicable on the services in question and that it had consistently filed ST-3 returns.
The department’s counsel relied on earlier tribunal decisions to support the taxability of the transactions and defended the denial of CENVAT credit because the invoices were not produced at the time of adjudication.
The two-member bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that when a prior audit and SCN had already addressed similar issues for the overlapping period, the department could not invoke the extended limitation period again for new demands on related matters.
It explained that merely detecting issues during a subsequent audit does not amount to suppression or fraud, especially when the department had access to the relevant data during the earlier audit.
The tribunal further observed that since the adjudicating authority had not fully examined the appellant’s legal arguments or the evolving case law, the matter needed to be re-examined.
It remanded the portion of the demand relating to the normal limitation period to the original authority for reconsideration, including the issue of CENVAT credit based on invoices now claimed to be available.
The tribunal held that the extended period of limitation was not applicable and set aside all penalties. The appeal was partially allowed.
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