It has already been discussed in detail in the previous cases that in what circumstances the extended period can be invoked. Section 73(1) of the Finance Act defines the situation when extended period would be invokable i.e., in case of 'suppression of fact'; 'fraud'; 'collusion' or 'wilful misstatement.' Section 11A of the Central Excise Act, is para materia to Section 73(1). It is quite clear that extended period of limitation can be invoked against the assessee only in the case the revenue is able to establish 'suppression'; 'wilful misstatement'; with intent to evade payment of tax on the behalf of the assessee. Mere non-payment of tax and omission on the assessee, does not amount to any 'suppression', 'fraud' or 'wilful misstatement' on the part of the assessee. The Section uses very strong words like 'suppression', 'fraud' or 'wilful misstatement'; however, it states if all those aforesaid expressions are with 'intent to evade', only then the extended period can be invoked. Therefore, the language of the section has to be construed strictly and it has to be seen that 'Suppression, fraud or wilful misstatement' on the part of the assessee was deliberate with intent to evade payment of tax. If the department is not able to establish 'Suppression', 'fraud' with intent to evade payment of tax, in that case, only the demand falling under the normal period can be confirmed and rest of the demand is liable to be dropped. However, if the whole demand is made out beyond the period of limitation and no part of the demand is falling under the normal period of limitation, the whole demand raised against the assessee would be time-barred and liable to be dropped.
A matter was handled by our team, wherein the appellant was engaged in providing non-scheduled operation of aircraft by making the services of aircraft available to various entities for travelling to places in India pre-fixed and pre-intimated on payment of charges, based on duration and destination. The appellant/assessee was under a belief that the services provided by it were neither 'scheduled air transport of passengers' nor 'supply of tangible goods' and therefore, did not pay tax. However, a show cause notice was issued to the appellant invoking extended period of limitation as provided under Section 73(1), proposing demand under the category of 'Supply of tangible goods.' The demand proposed was later confirmed the adjudicating authority while passing the adjudication order. The findings of adjudication were affirmed by the Ld. Commissioner (Appeals) in the appeal filed by the appellant and the matter was held against the appellant on merits as well as on limitation. On behalf of the Appellant, it was argued by our team that the extended period could not have invoked in the facts and circumstances of the case. That mere suppression of facts is not enough for invocation of the extended period as suppression has to be wilful with an intent to evade payment of tax. To support its contention, reliance was placed on the decisions of EIH Ltd. Vs. Commissioner of Central Excise, Delhi – 2019 (24) G.S.T.L. 592 (Tri. – Del.) & on Commissioner of Service Tax, New Delhi Vs. Air Charter Services P. Ltd. – 2017 (5) G.S.T.L. 107 (Tri. – Del.). Though, the findings of the impugned order were supported on the behalf of Revenue.
The Hon'ble Bench after considering the submissions from the both sides, found that while considering the submissions made by the appellant/assessee on limitation, the Additional Commissioner held that there is no requirement in law that Suppression has to be with intention to evade payment service tax and mere suppression is enough for invoking the extended period of limitation. Thereafter, the Commissioner (Appeals) merely confirmed the order passed by the Additional Commissioner. The Hon'ble Bench found that even assuming that there was suppression, it has to be examined whether suppression was wilful and with an intent to evade payment of service tax. The Hon'ble Bench taking not of the decisions of Hon'ble Supreme Court in Pushpam Pharmaceutical Co. Vs. Commissioner of Central Excise, Bombay – 1995 E.L.T. 401 (S.C.); Anand Nishikawa Company Ltd. Vs. Commissioner of Central Excise – 2005 (188) E.L.T. 140 (S.C.); Continental Foundation Joint and High Court and Tribunal decisions in Bharat Hotels Limited Vs. Commissioner of Central Excise (Adjudication) – 2018 (12) G.S.T.L. 368 (Del.); Mahanagar Telephone Nigam Ltd. Vs. Union of India and others – W.P. (C) – 7542 of 2018, found that it is quite evident from the aforesaid decisions that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of tax. In the absence of any intention to evade payment of service tax, the extended period of limitation cannot be invoked. Thus, mere non-disclosure of the receipts in the service tax return would not mean that there was intent to evade payment of service tax.
The Hon'ble Bench with the above findings and observations set aside the impugned order and allowed the appeal filed by the appellant.
Case details — International Air Charter v. Commissioner of Central Tax (Appeals – II), Delhi
Forum — CESTAT, New Delhi
Case No. — Final Order No. 51662/2023 in ST/120
Represented by — CA Atul Kumar Gupta