Wilful Concealment for Service Tax Evasion Not Attributable When Dept. Authorities Differ on Taxability of Services: CESTAT [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Bench in New Delhi has ruled that where departmental authorities disagree over whether the services are taxable, suppression or willful concealment is not liable.

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Bhardwaj Construction and Electricals , the assessee is rendering labor supply services to Nagar Nigam, Kota, for the purpose of maintaining street lights, installing cables, installing new light fixtures on poles, erecting PCC/RCC poles, and drawing cables in accordance with different work orders. Although the assesses failed to register for service tax or file service tax returns, the Department discovered that they were offering taxable services to Nagar Nigam.

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The Department issued a show-cause notice for the services rendered under the categories of Manpower Recruitment and Supply Agency, Management, Maintenance or Repair Service, and Erection, Commissioning or Installation Service since the assessee was unable to furnish the required information.

The demand was validated by the adjudicating authority. The assessee filed an appeal after being dissatisfied with the Adjudicating Authority's judgment, and the Commissioner (Appeals) upheld the Adjudicating Authority's order. Before the Tribunal, the assessee has contested the Commissioner's (Appeals) ruling.

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Since the services were not for commercial or industrial use, the assessee argued that they were providing them to Nagar Nigam in the bona fide belief that no service tax was due on the value of those services, and that nonpayment of service tax was therefore not deliberate.

The Department had little choice but to rely on the records it had obtained from the Nagar Nigam, arguing that the assessee had not cooperated with the investigation and had not provided any documentation.

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The Tribunal noted that without a compelling accusation or concrete action demonstrating fraud, collusion, or any deliberate misrepresentation or suppression of information with the intention of avoiding payment of duty, the extended term cannot be invoked. Therefore, the extended term cannot be invoked, and the assessee cannot be penalized.

The two-member bench of P.V. Subba Rao (technical) and Binu Tamta (judicial) has noted that no suppression or willful concealment with the intention of avoiding payment of duty can be attributed to the assessee when the two departmental authorities disagree on the taxability of the services under a particular category.

According to the Tribunal's opinion, "the unique circumstances of this case also do not justify invoking the extended period of limitation for the simple reason that the Adjudicating Authority had classified the services under the category of "Manpower Recruitment and Supply Agency Service," while the Adjudicating Authority had made them taxable under the category of "Management, Maintenance or Repair Service."

The Tribunal granted the appeal and returned the case to the Commissioner (Appeal) for further consideration.

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