No Special Treatment for Government Bodies u/s 73 of Finance Act: CESTAT Upholds Extended Limitation for Service Tax Evasion [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no special treatment is mentioned for government bodies under Section 73 of the Finance Act, 1994, and the bench upheld extended limitation for service tax evasion.

The assessee, the Rajasthan State Agriculture Marketing Board, had appealed before the CESTAT against the order passed by the Commissioner (Appeals) for confirming the demand of Rs. 14.23 lakhs under Section 73(2) of the Finance Act, 1994, along with interests and penalties.

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Coming to the facts of the case, the appellant had issued 3 work orders to M/s. Laxmi Narayan Agarwal, the service provider. It was observed by the department that neither the service provider nor the appellant paid any service tax on these services.

During the investigation conducted by the department, it was observed that as per Notification No. 30/2012-ST (entry 9), in works contracts, service tax was to be shared equally between the service provider and recipient. Since the appellant, as service recipient, failed to pay their 50% share, a Show Cause Notice was issued, and later on, the demand was confirmed by the Assistant Commissioner and upheld by the Commissioner (Appeals).

Several grounds were raised by the assessee in the appeal. The assessee’s counsel challenged the demand on the grounds of limitation. It was submitted that since the appellant is a governmental organisation, it cannot have any malafide intent, and the extended period of limitation under Section 73 of the Finance Act, 1994, cannot be invoked.

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The impugned order was vehemently supported by the department’s counsel.

The tribunal, after going through Section 73 of the Finance Act, noted that the section does not make any special provision for public sector or government entities.

The bench noted that the extended period of limitation was correctly invoked, as nothing about the appellant's overall actions suggests that it acted like a responsible government agency without intending to evade a service tax.

Delhi CESTAT, comprising Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member), dismissed the assessee’s appeal.

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