Case Law Details
Chennai Radha Engineering Works Pvt. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Conclusion: Extended period of limitation could not be invoked in the absence of fraud, suppression or wilful misstatement with intent to evade tax and accordingly, set aside the entire demand as time barred.
Held: Assessee-company was engaged in providing multiple taxable services, availed CENVAT credit on certain capital goods and claimed abatement under Notification No. 1/2006-ST. Department issued a show cause notice alleging wrongful availment of credit, ineligible documentation, and incorrect claim of abatement, invoking the extended period of limitation on the ground of suppression of facts. Adjudicating Authority confirmed the demand with interest and penalty, which was upheld in appeal. On further appeal, Tribunal held that the demand was wholly barred by limitation. It was observed that assessee had regularly filed ST-3 returns disclosing the availment of credit and that the records had been subjected to audit scrutiny. The issues raised in the show cause notice were already within the knowledge of the Department, and there was no evidence of wilful suppression or intent to evade payment of tax. Mere non-disclosure of detailed particulars, in the absence of a statutory requirement, or failure by the Department to scrutinize returns, could not justify invocation of the extended limitation period. Accordingly, the extended period under the proviso to Section 73(1) was held to be inapplicable, rendering the entire demand time-barred. In view of this finding, the Tribunal refrained from examining the merits of the case. The impugned order was set aside, and the appeal was allowed with consequential relief.
Chennai Radha Engineering Works Pvt. Ltd., the appellant herein, is challenging the Order-in-Appeal No. 353/2016 (STA-I) dated 13.06.2016 (the impugned order).
2. Briefly stated, the facts are that the appellant is a registered service provider of management, maintenance or repair service, erection commission and installation service, construction service, Consulting Engineer service, Testing and Inspection service, Business Auxiliary Service and Business Support Service. During the course of audit of the accounts of the appellant for the period 01.10.2006 to 30.09.2008, it was noticed that the appellant had, inter-alia, taken cenvat credit on tippers as capital goods. The department was of the view that the tippers are classified as motor vehicles falling under Chapter 87 of the Central Excise Tariff Act, 1985 (Tariff Act) and cenvat credit on motor vehicles are not allowed under the Cenvat Credit Rules, 2004 (CCR). It was further noticed that the credit was taken on the basis of an ineligible document, namely, commercial invoice. It was also seen that credit was taken on cranes on documents not addressed to their premises, but to their manufacturing unit located at different premises. Furthermore the appellant had wrongly availed abatement under Notification No.01/2006 ST dated 01.03.2006 for construction service by not fulfilling the condition of non-availment of cenvat credit prescribed thereon. Hence Show Cause Notice No.218/2012 dated 24.04.2012 (SCN) was issued proposing to deny the credits, demand service tax consequent to improper availment of notification No.1/2006-ST and impose penalties. After due process of law the Adjudicating Authority vide Order-in-Original No.31/2014 dated 30.05.2014 confirmed the demand along with applicable interest and imposed equivalent penalty under Section 78 of the Finance Act 1994. Aggrieved, the appellant preferred an appeal before the Commissioner of Service Tax (Appeals-I) against the said order who, however, rejected the appeal and upheld Order-in-Original in its entirety. Hence this Appeal.
3. Ms. G. Vardhini Karthik, Ld. Advocate appearing for the appellant contended that the entire demand was wholly barred by limitation in as much as the SCN does not alleged or evidence the ingredients of suppression or willful misstatement with intent to evade the payment of Service Tax and the Department could not have invoked the extended the period of limitation given that the appellant was regularly filling the ST-3 returns indicating the details of cenvat credit availed. These returns were also scrutinized during periodical visits by the audit wing of the department. Spot memo was issued by the Audit officers dated 27.11.2006 The Department had, vide its letter dated 07.12.2006 raised the same issue and the appellant had filed a detailed reply on eligibility of cenvat credit and availment of abatement vide letter dated 04.11.2008 and 13.11.2008 which is relied upon in the Show Cause Notice. In such circumstances the Show Cause Notice issued on 24.04.2012 is wholly barred by limitation.
4. Ld. Counsel further contended that on merits also the appellant was entitled to avail cenvat credit on the tippers which were used as accessory to conveyor system which falls under chapter 85 of the Central Excise Tariff Act, 1985 and then credit on the accessory to the capital goods can be taken as per Rule 2(a)(A)(iii) of the cenvat credit Rules. It was also contended that the cenvat credit availed on cranes was admissible as the appellant is a manufacturing company using the capital goods in their manufacturing process and also when performing output service that are subjected to Service Tax. The allegation of availment of abatement under Notification No. 01/2006 ST was also incorrect and in any event the appellant had vide the letter dated 04.11.2008 clearly informed the department that the abatement is availed on contract and cenvat credit on input or capital goods were not availed. Reliance was placed on the decisions in Delhi Airport Metro Express Pvt. Ltd. vs Commissioner of Central Excise & Customs, Rohtak-(2024) 25 Centax 238 (Tri.-Del), Vikas Metalliks & Energy Ltd. vs. Commissioner of C. Ex., Raipur-2017 (3) G.S.T.L. 404 (Tri.-Del), Jindal Stainless Steel Ltd. vs. Commissioner of C. Ex. Cus. (A), Visakhapatnam-2009(245) E.L.T.244 (Tri.-Bang.) and Bharat Heavy Electricals Ltd. vs Commissioner of CE, 2014 (34) STR 430 (Tri.-Mumbai) in support of the Appellant’s contentions.
5. Ms. Rajni Menon Ld. Authorised Representative appearing for the respondent reiterated the findings in the impugned order.
6. We have heard the rival submissions, perused the appeal records and the citations submitted.
7. The issues that arise for determination are :
A. Whether the Demand is wholly barred by limitation as contended by the Appellant?
B. If the demand is not barred by limitation, then on merits whether the Appellant is eligible for the credit and benefit of exemption notification No.1/2006-ST claimed, as contended by the Appellant ?
8. When a plea that the demand is wholly barred by limitation is raised, we find it apposite to deal with the said issue first. The question of limitation goes to the root of the matter and involves a question of jurisdiction to raise the demand itself in the first instance. This in turn is premised on the provisions of law that prescribe the situations as well as the attendant ingredients thereto that attract its application. The findings of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question therefore needs to be examined and is to be determined having regard to both the facts and law involved therein. To appreciate whether the demand is wholly barred by limitation, it would therefore be appropriate to reproduce section 73(1) of the Finance Act,1994 as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows:
“73.Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. —
(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of —
a. fraud; or
b. collusion; or
c. wilful mis-statement; or
d. suppression of facts; or
e. contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “one year”, the words “five years” had been substituted.”
9. Thus, from a perusal of sub-section (1) of section 73 of the Finance Act, it can be seen that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice.
10. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word “one year”, the word “five years” has been substituted.
11. The “relevant date‟ has been defined in section 73 (6) of the Finance Act as follows:
“ 73 (6) For the purposes of this section, “relevant date” means, —
(i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid—
a. where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
b. where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
c. in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
(ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof;
(iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.” (emphasis supplied)
12. The provisions of Section 73, as reproduced above, came up for consideration before the Honourable Delhi High Court in Bharat Hotels Ltd v. Commissioner of C.Ex (Adjudication), 2018 (12) GSTL 368 (Del.), and was analysed in detail. The relevant portions of the judgement are under:
“20. The only question of law that arises in the present appeal is whether the [Customs,] Excise and [Service] Tax Appellate Tribunal (CESTAT) fell into error in holding that the eviction of the extended period under proviso to Section 73(1) of the Finance Act in respect of two services, i.e. management, maintenance and repair services and Mandap Keeper services is justified in the facts and circumstances of the case. At the outset, the relevant section in question, i.e., Section 73 of the Finance Act (as applicable in 2008) needs to be stated. The section is reproduced below for reference –
“SECTION 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. – (1) Where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the Service Tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of –
a. fraud; or
b. collusion; or
c. wilful misstatement; or
d. suppression of facts; or
e. contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax, by the person chargeable with the Service Tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “one year”, the words “five years” had been substituted.
Explanation – Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of eighteen months or five years, as the case may be.”
21. The meaning of the words ‘wilful misstatement’ and ‘suppression of facts’ has been a subject matter of judicial scrutiny in various Supreme Court judgments which are necessary to be discussed before proceeding to the merits of this case. However, these words have been interpreted as given in Sections 28 of the Customs Act, 1962 (hereinafter referred to as “the Customs Act”) and 11A of the [Central] Excise Act, 1944 (hereinafter referred to as “the Excise Act”). In order to determine if the same interpretation extends to Section 73 of the Act the following decisions of the Supreme Court have to be looked at. In the case of Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur [(2013) 9 SCC 753 = 2013 (288) E.L.T. 161 (S.C.)] the Supreme Court discussed its previous judgments to determine the applicability of the proviso to Section 28 of the Customs Act for extension of limitation period for issuing notice for payment of duties that have not been levied, short-levied or erroneously refunded. The relevant paragraphs of the judgment are excerpted below :
“9. The show cause notice was issued on 2-8-2001, more than six months after the appellant had imported furnace oil on behalf of Uniworth Ltd. in January, 2001. This time period of more than six months is significant due to the proviso to Section 28 of the Act. The Section, at the relevant time, read as follows :
28. Notice for payment of duties, interest, etc. –
(1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, –
a. in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year;
b. in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :
Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words “one year” and “six Months”, the words “five years” were substituted.
Explanation. – Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be. (Emphasis supplied)
10. The section imposes a limitation period of six months within which the concerned authorities must commence action against an importer/assessee in case of duties not levied, short-levied or erroneously refunded. It allows the said limitation period to be read as five years only in some specific circumstances, viz. collusion, wilful misstatement or suppression of facts. Since the said show cause notice was issued after the elapse of six months, the revenue, for its action to be legal in the eyes of law, can only take refuge under the proviso to the section.”
22. Section 28 of the Customs Act like Section 73 of the Act (in this case) relates to notice for payment of duty that has not been levied, short-levied or erroneously refunded. The proviso to Section 28 of the Customs Act and the proviso to Section 73(1) of the Act, both set out conditions for extension of limitation period for issuing of a Show Cause Notice. The difference between the two sections lies in the insertion of conditions of ‘fraud’ and ‘contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax’ in Section 73 of the Finance Act, 1994. In Uniworth (supra), the Supreme Court discussed the interpretation of the proviso of a similar provision in Section 11A of the Excise Act and held that it is pari materia to the proviso to Section 28 of the Customs Act. The relevant paragraphs are excerpted below :
“13. This Court, in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, Bombay [1995 Supp (3) SCC 462], while interpreting the proviso of an analogous provision in Section 11A of The Central Excise Act, 1944, which is pari materia to the proviso to Section 28 discussed above, made the following observations :
xxxxxx xxxxxx xxxxxx
18. We are in complete agreement with the principle enunciated in the above decisions, in light of the proviso to Section 11A of the Central Excise Act, 1944. However, before extending it to the Act, we would like to point out the niceties that separate the analogous provisions of the two, an issue which received the indulgence of this Court in Associated Cement Co. Ltd. v. Commissioner of Customs [(2001) 4 SCC 59] 3, at page 619 in the following words :
53. .. Our attention was drawn to the cases of CCE v. Chemphar Drugs and Liniments [(1989) 2 SCC 12], Cosmic Dye Chemical v. CCE [(1995) 6 SCC 117], Padmini Products v. CCE [(1989) 4 SCC 275], N. Housing Board v. CCE [1995 Supp (1) SCC 50] and CCE v. H.M.M. Ltd. (supra). In all these cases the Court was concerned with the applicability of the proviso to Section 11A of the Central Excise Act which, like in the case of the Customs Act, contemplated the increase in the period of limitation for issuing a show cause notice in the case of non-levy or short-levy to five years from a normal period of six months….
54. While interpreting the said provision in each of the aforesaid cases, it was observed by this Court that for proviso to Section 11A to be invoked, the intention to evade payment of duty must be shown. This has been clearly brought out in Cosmic Dye Chemical case where the Tribunal had held that so far as fraud, suppression or misstatement of facts was concerned the question of intent was immaterial. While disagreeing with the aforesaid interpretation this Court at p. 119 observed as follows: (SCC para 6)
6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’ preceding the words ‘misstatement or suppression of facts’ which means with intent to evade duty. The next set of words ‘contravention of any of the provisions of this Act or Rules’ are again qualified by the immediately following words ‘with intent to evade payment of duty’. It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful.
The aforesaid observations show that the words “with intent to evade payment of duty” were of utmost relevance while construing the earlier expression regarding the misstatement or suppression of facts contained in the proviso. Reading the proviso as a whole the Court held that intent to evade duty was essentially before the proviso could be invoked.
55. Though it was sought to be contended that Section 28 of the Customs Act is in pari materia with Section 11A of the Excise Act, we find there is one material difference in the language of the two provisions and that is the words “with intent to evade payment of duty” occurring in proviso to Section 11A of the Excise Act which are missing in Section 28(1) of the Customs Act and the proviso in particular….
56. The proviso to Section 28 can inter alia be invoked when any duty has not been levied or has been short-levied by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter, his agent or employee. Even if both the expressions “misstatement” and “suppression of facts” are to be qualified by the word “wilful”, as was done in the Cosmic Dye Chemical case while construing the proviso to Section 11A, the making of such a wilful misstatement or suppression of facts would attract the provisions of Section 28 of the Customs Act. In each of these appeals it will have to be seen as a fact whether there has been a non-levy or short-levy and whether that has been by reason of collusion or any wilful misstatement or suppression of facts by the importer or his agent or employee. (Emphasis supplied)”
23. It is important to note the proviso to Section 11A of the Excise Act at this stage. It states that :
“Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by the reason of –
a. fraud; or
b. collusion; or
c. any wilful misstatement; or
d. suppression of facts; or
e. contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice.”
24. As noticed in the excerpted portions of the Supreme Court’s judgment, the material distinction between the provisos of Section 11A of the Excise Act and Section 28 of the Customs Act was contemplated in Associated Cement Co. Ltd. v. Commissioner of Customs (supra) [2001 (128) E.L.T. 21 (S.C.)]. The only material difference in the language of the two provisions is that the phrase ‘with intent to evade payment of duty’ is not used in Section 28 of the Customs Act. The Court held that the words ‘fraud’ and ‘collusion’ inherently imply the requirement of an intent, which in this case is the intent to evade payment of duty. With respect to misrepresentation and suppression of facts the Court held that the fact that these words are preceded by the word ‘wilful’ means that there should be an intention to evade payment of duty behind these acts. And, therefore, in Uniworth (supra), the judgments of the Supreme Court interpreting the proviso to Section 11A of the Excise Act were applied in the interpretation of the proviso to Section 28 of the Customs Act.
25. The meaning of the phrase pari materia has been explained in an American case in the following words: “Statutes are in pari materia which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the word simlis. It is used in opposition to it – intimating not likeness merely but identity. It is a phrase applicable to public statutes or general laws made at different times and in reference to the same subject.” [United Society v. Eagle Bank, (1829) 7 Connecticut 457, p. 470, as cited in CRAIES, Statute Law, p. 134 (7th Edition)]. The provisos to Sections 11A of the Excise Act, 28 of the Customs Act and Section 73 of the Finance Act, refer to the same class of persons, i.e., persons from whom tax has been not been levied, or has been short-levied or erroneously refunded. The subject matter of these provisos is issuance of a Show Cause Notice in order to collect such tax. Further, there seems to be no difference in language of the proviso to Section 11A of the Excise Act and Section 73(1) of the Finance Act. Since, the pith and substance of both these provisions is the same, the various judgments of the Supreme Court discussing the interpretation of proviso to Section 11A of the Excise Act can be extended to interpret Section 73(1) of the Finance Act. Further, since proviso to Section 28 of the Customs Act is pari materia to proviso to Section 11A of the Excise Act (as held in Uniworth), the interpretation of proviso to Section 28 may also be extended to interpret the proviso to Section 73 of the Finance Act. Uniworth (supra) is also authority on the meaning of ‘wilful misstatement’ and ‘suppression of facts’; the Court held that :
“…
12. … The conclusion that mere non-payment of duties is equivalent to collusion or wilful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso.
…..
14. In Sarabhai M. Chemicals v. Commissioner of Central Excise, Vadodara [(2005) 2 SCC 168], a three-judge bench of this Court, while referring to the observations extracted above, echoed the following views :
“23. Now coming to the question of limitation, at the outset, we wish to clarify that there are two concepts which are required to be kept in mind for the purposes of deciding this case. Reopening of approvals/assessments is different from raising of demand in relation to the extended period of limitation. Under Section 11A(1) of the Central Excise Act, 1944, a proper officer can reopen the approvals/assessments in cases of escapement of duty on account of non-levy, non-payment, short-levy, short-payment or erroneous refund, subject to it being done within one year from the relevant date. On the other hand, the demand for duty in relation to extended period is mentioned in the proviso to Section 11A(1). Under that proviso, in cases where excise duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded on account of fraud, collusion or wilful misstatement or suppression of facts, or in contravention of any provision of the Act or Rules with the intent to evade payment of duty, demand can be made within five years from the relevant date. In the present case, we are concerned with the proviso to Section 11A(1).
24. In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay [(1995) 6 SCC 117], this Court held that intention to evade duty must be proved for invoking the proviso to Section 11A(1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression “fraud and collusion” but misstatement and suppression is qualified by the preceding word “wilful”. Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for invoking the proviso to Section 11A.
25. In case of Pushpam Pharmaceuticals Co. v. C.C.E. [1995 (78) E.L.T. 401 (S.C.)], this Court has held that the extended period of five years under the proviso to Section 11A(1) is not applicable just for any omission on the part of the assessee, unless it is a deliberate attempt to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done does not constitute suppression of fact.”
26. Again, the Supreme Court in Continental Foundation Joint Venture Holding Commissioner of Central Excise, Chandigarh-I [(2007) 10 SCC 337 = 2007 (216) E.L.T. 177 (S.C.)], held that :
“10. The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or ‘collusion’ and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. ”
27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word ‘suppression’ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. “fraud, collusion, wilful misstatement”. As explained in Uniworth (supra), “misstatement or suppression of facts” does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid paying excise duty. The terms ‘misstatement’ and ‘suppression of facts’ are preceded by the expression ‘wilful’. The meaning which has to be ascribed is, deliberate action (or omission) and the presence of an intention. Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention.
28. In the present case, the Revenue argues that appellant wilfully suppressed the value of taxable services and thus did not discharge its liability of paying the Service Tax on same. The contention of the appellant is that the appellant was under a bona fide belief that the appellant was not liable for payment of Service Tax for the Mandap Keeping and Management, Maintenance and Repair Services. The appellant has supported the nonpayment of Service Tax for Mandap Keeper Services by Notification No. 12/2003-S.T. It also states that, during the enquiry itself, it paid Service Tax on the sale of the above-mentioned items for the periods 2004-05 and 200506 with interest and had also started paying Service Tax on these items regularly from April, 2006. The same has been also acknowledged by the DGCEI in the SCN.
29. As regards management, maintenance and repair services the appellant claimed that it was unaware of the development under Section 65(105)(zzg) of the Finance Act and that when the same came to the knowledge of the appellant, the appellant promptly got itself registered for the said service and started discharging its Service Tax liability with respect to the said service from financial year 2006-07, and also paid Service Tax for the financial year 2005-06. The same has again been also acknowledged by the DGCEI in the SCN. The absence of any material disclosing intent to evade payment of Service Tax by the appellant is evident by the fact that it promptly made all the payments pertaining to Service Tax liability with respect to Mandap Keeper Service and Management, Maintenance and Repair Service as soon as the appellant became aware of the same (during the enquiry) and continued to pay Service Tax thereafter. The authorities are unanimous that to invoke the extended period under cognate provisions (such as Section 11A of the Excise Act or Section 28A of the Customs Act) the burden is cast upon it to prove suppression of fact. The Revenue has not been able to prove an intention on the part of the appellant to evade tax by suppression of material facts. In fact, it is clear that the appellant did not have any such intention and was acting under bona fide beliefs. For these reasons, it is held that the Revenue cannot invoke the proviso to Section 73(1) of the Finance Act to extend the limitation period for issuing of SCN. The SCN was issued on 24-10-2008. The undischarged liability for payment of Service Tax with respect to Mandap Keeper Service and Management, Maintenance and repair services alleged in the SCN is for the period 2004-06 and 2005-08 respectively. Since the proviso to Section 73(1) cannot be invoked the SCN had to be served within one year from the relevant date. Therefore, the SCN with respect to short payment of Service Tax for Mandap Keeper Service for the years 2004-2006 is barred by limitation. The SCN with respect to short payment of Service Tax for Management, Maintenance and Repair Services for the years 2005-2007 is also barred by limitation.” (emphasis supplied)
Without multiplying authorities suffice to say, similar views have been taken in the decisions in Principal Commissioner of CGST & C.Ex, Mumbai v. Securities and Exchange Board of India, 2023 (385) ELT 865 (Bom.) and Naresh Kumar & Co Pvt Ltd v. UOI, 2014 (36) STR 271 (Cal.).
13. We find that the contention of the appellant that the demand was wholly barred by limitation has been addressed by the appellate authority in para 14 of the impugned Order in Appeal, as under:
“ 14. As regards the invocation of extended period of limitation and imposition of penalty, it is observed that the appellants had wrongly availed ineligible credit for which they are not entitled. They had not disclosed the details of the cenvat credit taken by them to the department. The wrong availment of Cenvat Credit was detected only during the verification by the department which would have otherwise gone unnoticed. Similarly they had not furnished the details of exemption availed by them in the ST 3 which was also detected only during the audit. Thus, the suppression of fact with intention to evade tax has clearly been established. Further, the arguments of the appellant viz., submitting periodical returns, periodical visits by the Audit wing, DGCE visit in July, 2007 etc., had already been negated after a elaborate discussion in the impugned order vide paras 3.11 to 3.16 and concluded that extended period had rightly been invoked in this case. I do not find any reason not to toe the line. Thus this is the case which involves one of the ingredients namely the suppression of facts with intention to evade service tax as provided in the proviso to section 73(1) of the Act. Therefore the invocation of extended period is rightly invoked in this case.”
14. We notice that the allegation in the SCN in para 5 is as under:
“5.0. The above facts came to the notice of the Department only during the course of audit carried out by the officers of the Internal Audit Group of the Chennai Service Tax Commissionerate. Though the assessee were registered with the Department and were also filing the ST-3 returns, the assessee did not indicate the exact nature of Cenvat Credit availed by them or declare the details of cenvat credit availed on the capital goods. They neither approached the department on the eligibility to avail cenvat credit of certain capital goods. Though the assessee had availed exemption in terms of Notification No.1/2006-ST, they did not intimate the Department or approached the Department on their eligibility to avail such exemption in terms of the said Notification or neither indicated the details of such exempted value in the ST-3 returns filed during the material period. It appears that the assessee had suppressed the facts with intent to evade payment of service tax.”
15. At this juncture, it would be apposite to notice the decision of a coordinate bench of the tribunal in Accurate Chemical Industries v CCE, Noida, reported in 2014(300) ELT 451 (Tri-Del), wherein, the question of the effect of non-scrutiny of the returns filed by the assessee upon self-assessment was examined in detail. The relevant portions are as under:
“7.1 Though with effect from 1-10-1996, self-assessment has been introduced and the monthly ER-1 return filed by an assessee are not required to be assessed by the Range Superintendent (RO), in terms of the following instructions issued by the Central Board of Excise & Customs (CBEC) not only every ER-1 return filed by an assessee is required to be scrutinized by the RO for correctness of rate of duty applied to the goods cleared, arithmetical accuracy of duties/amounts dues and payable; Cenvat credit availment, valuation etc., this scrutiny must be completed within 3 months and the returns of the units whose annual duty payment is Rs. 1 crore to Rs. 5 crores and more than Rs. 5 crores, are also to be cross checked by the Assistant Commissioner and Additional Commissioner, respectively.
1. Circular No. 249/83/96-CX., dated 11-10-1996 (para 3);
2. Circular No. 311/27/97-CX., dated 15-4-1997 (regarding maintenance of register of scrutiny and reporting progress of scrutiny of ER-1 returns in monthly Technical Report being sent to the Board.)
3. Circular No. 818/15/2005-CX., dated 15-5-2005 issued by C.B.E.& C. under Rule 12(3) of Central Excise Rules, 2002 prescribing two stage scrutiny of ER-1 and ER-3 returns – preliminary scrutiny and detailed scrutiny as per detailed check list prescribed for this purpose.
7.2 From the above Circulars of the C.B.E. & C. regarding scrutiny of ER-1 returns, it is clear that the returns filed by an assessee are required to be subjected to detailed scrutiny in course of which the concerned officer can call for the documents from the assessee wherever necessary for scrutiny. Therefore in this case, if the concerned Range officer/Assistant/Deputy Commissioner or concerned Additional Commissioner had checked the returns, the short payment would have been immediately detected as, as observed by the Commissioner in para 4.5 of the impugned order, even the registration certificate of the appellant mentioned them as a unit of Accurate Transformers Ltd., and in all the documents of the appellant, the transfer of goods from the appellant to Accurate Transformer Ltd. had been reflected as inter unit transfer. Neither there is any allegation nor evidence to prove that there was some collusion between the appellant and the Jurisdictional Central Excise officers. The short payment was detected when during visit by the audit team, the records maintained by the appellant and made available by them to the audit officers were examined by them, – something which should have been done by the Jurisdictional Range Officers and Divisional Assistant Commissioner/Deputy Commissioner much earlier. The assessee cannot be penalized by invoking extended period under proviso to Section 11A(1) for demand of duty and penal provisions of Section 11AC for indolence on the part of the jurisdictional Central Excise officers. Moreover Apex Court in a series of judgments –
CCE v. Chemphar Drugs & Liniments reported in 1989 (40) E.L.T. 276 (S.C.); Padmini Products v. Collector reported in 1989 (43) E.L.T. 195 (S.C.); Pushpam Pharmaceuticals v. CCE reported in 1995 (78) E.L.T. 401 (S.C.); Anand Nishikawa Co. Ltd. v. CCE, Meerut reported in 2005 (188) E.L.T. 149 (S.C.);
Continental Foundation Jt. Venture v. CCE, Chandigarh reported in 2007
(216) E.L.T. 177 (S.C.)
has held that something positive other than mere inaction or nonpayment of duty is required for invoking extended period under proviso to Section 11A(1) and that suppression means failure to disclose full information with intent to evade the payment of duty and mere omission to give certain information is not suppression of fact unless it is deliberate with intention to evade the payment of duty. The above condition for invoking extended period prescribed in these judgments is not satisfied in this case.” (emphasis supplied)
The said decision stands affirmed in CCE Noida v Accurate Chemical Industries, 2014 (310) ELT 441 (All).
16. When the assessee admittedly has duly filed the relevant returns, it was for the Department to take up the scrutiny of the returns as per extant departmental instructions and raise a demand, if any. Failure to do so cannot be overcome by attributing malafide to the assessee merely because self-assessment was prevailing during the relevant period, as that would run counter to the dictum of the Hon’ble Apex Court in the Uniworth Textiles case, reproduced above. This Tribunal has consistently taken a view that allowing the assessee to self-assess the tax is a mere facility extended to the assessee. That in no way detracts or dilutes the statutory responsibility of the jurisdictional central excise officers to ensure correctness of the assessment, exemptions claimed, cenvat credit taken and availed, and duty payments made. Such a view has been repeatedly expressed as can be seen from the decisions in M/s. Xomox Sanmar Ltd, Unit II v. Commissioner of CGST & Central Excise, reported in 2024 (11) TMI 1418 – CESTAT CHENNAI, Final Order No.40567/2025 dated 30.05.2025 in the case of M/s. Nobel King Purchase Solutions Pvt Ltd v Commissioner of GST and Central Excise and in Final Order No.40664/2025 dated 26.06.2025 in the case of M/s. Exide Industries Ltd v Commissioner of GST & Central Excise.
17. Likewise, we find that in a case where revenue had preferred the appeals on the ground that the respondents in their monthly ER returns filed for the relevant period, have simply shown the quantum of credit availed on inputs without specifying the service on which the said credit was availed, and that therefore this would amount to suppression from the department with intent to avail wrongful credit, a co-ordinate bench of this Tribunal in its decision in CCE, Indore v Medicaps Ltd, reported in 2011(24) STR 572 (Tri-Del) has held as under:
4. We find no merits in the above contention of the revenue. Admittedly the credit availed by the assessee was reflected in the monthly returns. If there is no column in the monthly return to show the nature of service on which the credit was availed, the assessee cannot be blamed for not disclosing the said fact. For invoking the longer period of limitation, there has to be a suppression or mis-statement with an intent to evade payment of duty. When the respondents have reflected the amount of credit availed by them in their monthly returns, it cannot be said that there was any positive act of suppression on misstatement on their part. As such, we are of the view that Commissioner (Appeals) has rightly held a part of the demands as barred by limitation.
18. It is no more res integra that the accusation of non-disclosure can only be made if there was in the first instance a requirement to disclose. In this regard, we find that the decision of the Honourable Apex Court in CCE & Cus v Reliance Industries Ltd, 2023 (385) ELT 481 (SC) merits reproduction, wherein the Honourable Apex Court held as under:
“20. We have seen the format of the ER-1/RT-12 return which the assessee was required to file on a monthly basis for intimating to the department the value of clearances effected and the amounts of duties paid thereon. We do not find any separate column or requirement in these forms for declaring the value and other details of clearances effected to the deemed export buyers i.e. holders of advance licenses. Note 4 under Form ER-1 does require separate details to be mentioned for exports under bond. Indisputedly clearance made to domestic buyers even if they are considered deemed exports are not clearances for “exports under bond” for which category of clearances alone requirement existed for separate disclosure in the ER-1/RT-12 returns. In the absence of any specific column or note similar to Note 4, requiring separate disclosure of the value of deemed export clearances, we do find any merit in the findings of the adjudicating authority that there was suppression of facts as a consequence of assessee’s failure to separately disclose the value of deemed export clearances. An accusation of nondisclosure can only be made if there is in the first instance a requirement to disclose.” (emphasis supplied)
19. There is a catena of decisions in similar vein wherein, various High Courts as well as this Tribunal, have consistently held that when the assessee is registered and filing returns regularly, the range officer had a duty to scrutinize returns and detect any irregularity and to raise pertinent queries in this regard and that in the light of any negligence or failure to do so, the allegation of suppression by the assessee cannot be countenanced. To cite a few, apart from those cited above, the decisions in Jagadamba Power & Alloys Ltd v CCE, Jaipur, 2025(391) ELT 478 (Chhattisgarh) affirmed in CCE v Jagadamba Power & Alloys Ltd, 2025 (391) ELT 465 (SC), Swastik Engineering v CCE, Bangalore, 2010 (255) ELT 261 (Tri-Bang) upheld in CCE Bangalore II v Swastik Engineering,2014 (302) ELT 333 (Kar) and the decisions of the Principal Bench of the Tribunal at Delhi in Final Order No.50511/2025 dated 23-04-2025 in the case of M/s. Indian Railway Catering and Tourism Corporation Ltd v. The Commissioner of Service Tax, Delhi-I and in Final Order No.50515/2025 dated 23-04-2025 in the case of M/s. Industrial Sales & Services v Commissioner of CGST &Service Tax, Jaipur, would suffice.
20. That apart, we find that the SCN itself concedes that it stems from the audit of the appellant’s accounts conducted by the Internal Audit Group for the period 01-10-2006 to 30-09-2008. The spot memo dated 27.11.2006 issued by the Superintendent of Audit indicates that the appellant’s documents/records were verified during the course of audit conducted on 22 to 24.11.2006. The spot memo reveals that the appellant’s ST-3 returns and cenvat credit availed documents were verified and pertinently the appellant’s agreement with various thermal power stations to carry out continuous operation of conveyor system to handle coal, iron, lignite etc were noticed and demand of service tax under the category of business support services was proposed. This was followed by a letter dated 07-12-2006 calling upon the appellant pay up the service tax dues which too notices certain payments made by the appellant and requires payment of interest too. In compliance the Appellant has vide its letter dated 4th November 2008 made the payments along with interest which letter is seen acknowledged. The appellant has also intimated the availment of cenvat credit as well as the abatement under the notification No.1/2006-ST and the additional details undertaken to be furnished is seen provided vide letter dated 13th November 2008 which is also a relied upon document in the SCN dated 24.04.2012. It is apposite at this juncture to notice that the Hon’ble High Court of Bombay in the decision in Rajkumar Forge Ltd v. UOI, 2010 (262) ELT 155 (Bom) after noticing that the petitioner’s factory was audited and the audit objections were replied to, held that in the light of the audit carried out by the Respondents of the Petitioners’ factory and the correspondence that is addressed by the Petitioners to the Respondents, it cannot be said that the Petitioners have misstated facts or there is fraud practiced by the petitioners and held in favour of the petitioners on limitation. Likewise, in CCE, Bangalore v. Pragathi Concrete Products Ltd, 2015 (322) ELT 819 (SC), the Apex Court has held as under
“3. It is also found as a matter of fact, that the unit of the respondent was audited during this period several times and there were physical inspections by the Department as well. Therefore, there could not be any case of suppression. We are in agreement with the aforesaid view taken by the CESTAT. As a result, this appeal is dismissed.”
The decisions in Bharati Televentures Ltd v. CCE, Pune III, 2014 (33)STR 86 (Tri-Mumbai), as well as the decision of the Principal Bench of the Tribunal in Delhi Airport metro Express Pvt Ltd v. CCE & Customs, Rohtak, (2024) 25 Centax 238 (Tri-Del) relied on by the Appellant have also held that when audit has been conducted and the records of the appellant has been examined, in such a situation it is not permissible for the department to take recourse to the extended period of limitation contemplated under the proviso to Section 73(1) of the Act.
21. In view of our aforesaid discussions, the foregone conclusion is that the Appellant has not suppressed facts, much less suppressed facts with an intent to evade payment of service tax and hence the extended period of limitation was not invokable and the demand is wholly barred by limitation. Though, ex facie, the decisions cited by the appellant appear to be in its favour on merits, we are disinclined to go into the merits of the dispute as a finding on merits is now rendered inconsequential.
22. Furthermore, we find that the Honourable High Court of Allahabad, in Commr of Cus, C.Ex & S.Tax v. Monsanto Manufacturer Pvt Ltd, 2014 (35) STR 177 (All), has held as under:
“20. Though in the appeal by the assessee several questions of law have been framed, the following question has been pressed at the hearing :
“Whether the Tribunal having held that proceedings were barred by limitation and proceedings were liable to be quashed on the ground of limitation, the Tribunal committed an illegality in deciding the question on merits. Hence is the finding of Tribunal on merits liable to be set aside?”
21. The appeal is admitted on the following question of law and is by consent taken up for final hearing.
22. The Tribunal came to the conclusion that the demand by the Revenue was beyond the period of limitation of one year prescribed under Section 73(1) of the Finance Act, 1994 and that the period of five years could not have been invoked. That part of the judgment of the Tribunal has been confirmed in the companion appeal. Once that be the position and the Tribunal having come to the conclusion that the extended period of limitation could not have been validly applied, the Tribunal, in our view, acted outside its jurisdiction in entering upon the merits of the dispute on whether the demand for duty should be confirmed. Once it is held that the demand is time barred, there would be no occasion for the Tribunal to enquire into the merits of the issues raised by the Revenue.
23. In State Bank of India v. B.S. Agricultural Industries (I)- (2009) 5 SCC 121, the Supreme Court dealt with a situation where the consumer forum had held that the complaint was barred by limitation but had nonetheless proceeded to decide the issue on merits. Holding that this would amount to an illegality, the Supreme Court observed :
“12. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the sufficient cause has been shown and delay condoned for the reasons recorded in writing. In other words, it is the duty of the consumer forum to take notice of Section 24A and give effect to it. If the complaint is barred by time and yet, the consumer forum decides the complaint on merits, the forum would be committing an illegality and, therefore, the aggrieved party would be entitled to have such order set aside.”
24. Consequently, since the Tribunal was justified, as we have held, in coming to the conclusion that the demand was time barred, there was no occasion for the Tribunal to enter upon the merits of the dispute. We, accordingly, answer the question of law as framed by the assessee in the affirmative and in favour of the assessee.
25. The appeal by the assessee shall stand disposed of in the aforesaid terms.” (Emphasis supplied)
23. We also find that the Honourable Supreme Court in Commissioner of Customs, Mumbai v B.V. Jewels, 2004 (172) ELT 3 (SC), has observed that “ If, in reality, the CEGAT found that the action taken by the departmental authorities was beyond the period of
limitation, it could have disposed of the appeals before it only on that ground without examining the merits”. This decision of the Apex Court in B.V. Jewels ibid is noticed to have been followed in Commr of Service Tax, Mumbai IV v. Rochem Separations (I) P Ltd, 2019 (366) ELT 103 (Bom). It is also seen that the jurisdictional High Court in E.T.A General Pvt Ltd v Additional Commissioner of
C.Ex, Chennai, 2016 (44) STR 409 (Mad) has held as under:
”11. In Commissioner of Customs, Central Excise & Service Tax v. M/s. Monsanto Manufacturer Pvt. Ltd., reported in 2014-TIOL-550-HC-ALL-ST, while declaring the demand as beyond the period of one year, the Tribunal, entered into the merits of the appeal filed by the assessee and passed an adverse order. Before the Allahabad High Court, one of the substantial questions of law raised by the assessee, was when the Tribunal having held that proceedings were barred by limitation, has committed any illegality in deciding the question on merits. Whether the finding of the Tribunal on merits, is liable to be set aside?”
12. While addressing the above said substantial question of law, decision of the Hon’ble Supreme Court in State Bank of India v. B.S. Agricultural Industries reported in (2009) 5 SCC 121, has been pressed into service, wherein, the Hon’ble Supreme Court had an occasion to deal with a situation, where the consumer forum held that the complaint was barred by limitation, but nonetheless had proceeded to decide the issue on merits. Dealing with the issue, which is similar to the case on hand, at Paragraph 12, the Hon’ble Supreme Court in State Bank of India’s case (cited supra), held as follows :-
”12. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the sufficient cause has been shown and delay condoned for the reasons recorded in writing. In other words, it is the duty of the consumer forum to take notice of Section 24A and give effect to it. If the complaint is barred by time and yet, the consumer forum decides the complaint on merits, the forum would be committing an illegality and, therefore, the aggrieved party would be entitled to have such order set aside.”
Applying the ratio of the Supreme Court in State Bank of India v. B.S. Agricultural Industries reported in (2009) 5 SCC 121, the Allahabad High Court in Commissioner of Customs, Central Excise & Service Tax v. M/s. Monsanto Manufacturer Pvt. Ltd., reported in 2014-TIOL-550-HC-ALL-ST, answered the question of law in favour of the assessee.
13. Judgment of the Supreme in State Bank of India’s case (cited supra), followed in Commissioner of Customs’s case (cited supra), squarely applies to the facts on hand, wherein, CESTAT, Madras, while dismissing the appeal as time-barred, has entered into the merits of the case and dismissed the same, on merits. In the words of the Hon’ble Supreme Court, that would be an illegality.
14. Though Mr. A.P. Srinivas, learned counsel appearing for the Revenue submitted that the correctness of the order impugned before us, can be decided in an appeal before the CESTAT and prayed to sustain the order, dated 15-2-2016 in W.P. No. 5501 of 2016, in the light of the above discussion and the decision in State Bank of India’s case (cited supra), we are not inclined to accept the said contention. When the Hon’ble Supreme Court has described the manner of disposal of an appeal, as illegality, the same can be corrected by this Court, in exercise of the powers under Article 226 of the Constitution of India and no useful purpose would be served in relegating the appellants to approach the alternative remedy. Courts have held that a writ petition is maintainable, when the act committed is per se illegal, and contrary to the statute.
15. In the light of the above discussion and decisions, we are inclined to interfere with the order of the Writ Court as well as the Order-in-Appeal No. 349/2015 (STA-II), dated 30-11-2015, passed by the Commissioner of Service Tax (Appeals-II) and the same are set aside.”
24. Given our findings that the demand is wholly barred by limitation for the reasons stated above, adhering to judicial discipline and respectfully following the binding judicial precedents of the Honourable Apex Court and High Courts cited supra, we refrain from delving into the merits of the matter and rendering a finding on merits. Inasmuch as we have found the demand unsustainable and liable to be set aside, the consequential demand of interest and penalty imposed is also found to be untenable and liable to be set aside.
25. For the reasons stated above, we allow the appeal and set aside the impugned Order in Appeal. The appellant is entitled to consequential reliefs in law, if any.
(Order pronounced in the open court on 24.03.2026)
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