CESTAT Sets Aside Service Tax Demand as Extended Limitation Was Invoked on Already Known Facts

United Tours And Travels Vs Commissioner of Central Excise & CGST (CESTAT Allahabad)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, allowed the appeal filed by the assessee and set aside the Order-in-Appeal dated 19.06.2025, which had confirmed a service tax demand, interest, and penalty under the Finance Act, 1994. The dispute arose from a comparison of information received from the Income Tax Department for the financial year 2016-17 with the details disclosed by the appellant in its ST-3 returns. The appellant, engaged in providing tour operator and air travel agent services, had reported a gross value of services of Rs. 1,52,100 in ST-3 returns, whereas sales of services shown in the Income Tax Return amounted to Rs. 6,08,75,938. Based on this discrepancy, the Department alleged short payment of service tax and issued a show cause notice dated 08.10.2021 invoking the extended period of limitation. The notice proposed recovery of service tax, interest, and penalties under Sections 78 and 77 of the Finance Act, 1994.

The adjudicating authority partly confirmed the demand and imposed interest and penalties. On appeal, the Commissioner (Appeals) reworked the tax liability. The appellate authority examined receipts from sales of air tickets, Umrah tickets, and Haj pilgrims. While allowing deduction of air fare amounts in relation to Umrah services and treating the appellant as an agent for that portion, the Commissioner (Appeals) held that the appellant was liable to service tax on the balance value relating to Umrah services. With regard to Haj receipts, the Commissioner (Appeals) concluded that the appellant acted as a tour operator because amounts were collected as package charges along with service charges and therefore confirmed service tax liability on those receipts. The penalty under Section 77(1)(c) was, however, set aside on the ground that the appellant had replied to the show cause notice and participated in personal hearings.

Before the Tribunal, the appellant argued that an earlier show cause notice dated 20.11.2017 had already been issued on the same issue and on the same grounds for the period 2012-2016 by invoking the extended period of limitation. That notice had demanded service tax of Rs. 1,91,26,956 and had already been adjudicated, with the appeal against that order pending before the Tribunal. The appellant contended that since the Department had already examined the same issue and facts in the earlier proceedings, the subsequent show cause notice dated 08.10.2021 for the period 2016-17 could not again invoke the extended period of limitation. Reliance was placed on the decision of the Supreme Court in Nizam Sugar Factory.

The Tribunal examined the computation tables in both show cause notices and found that the demand in the present notice was raised on identical grounds and based on similar documents and information as the earlier notice. It observed that once the facts had come to the knowledge of the Department while issuing the first show cause notice, the Revenue could not subsequently invoke the extended period of limitation on the basis of the same or similar facts. Referring extensively to the Supreme Court’s decision in Nizam Sugar Factory and other judgments cited therein, the Tribunal noted that where an earlier show cause notice had already been issued on the same subject matter and relevant facts were within the Department’s knowledge, suppression of facts could not be alleged for subsequent periods on the same basis.

Having concluded that the demand itself was based on an impermissible invocation of the extended limitation period, the Tribunal held that the impugned order could not be sustained. Accordingly, it set aside the Order-in-Appeal and allowed the appeal.

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CESTAT Sets Aside Service Tax Demand Because Extended Limitation Was Invoked on Facts Already Known to Department

SEO Description: The Tribunal held that once an earlier show cause notice had been issued on the same issue, the Department could not invoke the extended period of limitation again. The service tax demand and related liabilities were set aside.

Service Tax Demand Quashed Because Second Show Cause Notice Relied on Same Facts as Earlier Notice

SEO Description: CESTAT found that the subsequent notice was based on identical grounds and information already examined by the Department. The invocation of the extended limitation period was therefore invalid.

No Suppression of Facts After Earlier Show Cause Notice on Same Issue, Rules CESTAT

SEO Description: The Tribunal held that facts already within the Department’s knowledge cannot later be treated as suppressed. Consequently, the extended period of limitation could not be applied.

CESTAT Allows Appeal Because Revenue Could Not Reinvoke Extended Limitation on Identical Grounds

SEO Description: The Tribunal observed that the earlier proceedings had already placed the relevant facts before the Department. A second notice invoking suppression on the same grounds was held unsustainable.

Service Tax Proceedings Fail Because Department Already Possessed Relevant Information

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FULL TEXT OF THE CESTAT ALLAHABAD ORDER

This appeal is directed against Order-in-Appeal No.202-ST/APPL/LKO/2025 dated 19/06/2025 passed by Commissioner (Appeals) Customs, Central Excise & CGST, Lucknow. By the impugned order, Commissioner (Appeals) has modified the Order-in-Original No.74/JC/LKO/ST/2023-24 dated 22.02.2024 as follows:

“5.7 In view of above total liability of Service tax come to Rs. 12,07,371/- [Rs. 235/ Rs. 2,97,273/- + Rs. 9,09,863/­]. I find that appellant had filed the ST-3 returns for the impugned period and paid the Service tax Rs. 22,816/-.

Thus, net service tax liability comes to Rs. 11,84,555/-[Rs. 12,07,371/- Rs. 22,816/-) along with interest. Accordingly, the penalty imposed under Section 78 of the Act is equal to the aforesaid liability of Service tax.

5.8 I find that appellant has deposited the Service tax Rs. 4,05,146/-, interest Rs. 3,51,564/-and penalty Rs. 1,01,287/- vide challan dated 08.12.2023. The said deposited amount is appropriated against the aforesaid liability of Service tax, interest and penalty respectively. I also find that penalty under Section 77 (1)(c) has been imposed for non-submission of information. I find that appellant has submitted the reply of Show cause notice and also appeared for personal hearing before adjudicating authority. Thus, penalty imposed under Section 77(1)(c) of the Act is not proper in the eyes of natural justice. Hence,

I set aside the penalty imposed under Section 77 (1) (C) of the Act.”

2.1 Appellant is engaged in providing services under “tour operator services, air travel agent services” and are registered with the Service Tax department on vide Service Tax Registration No.ACFPR3748FST001.

2.2 On comparison of information received from the Income Tax department for the financial year 2016-17, with the details as provided by the appellant in their ST-3 following was observed

2.3 A letter dated 13/07/2021, reminder dated 08/09/2021 and summon dated 13.09.2021 was issued to the appellant for furnishing Balance Sheet, Service Tax returns, Ledger Account, Bank Statement, Copies of invoices for the financial year for verification of their service tax liability. Appellant had not provided any information.

2.4 Thus as per the available data service tax liability for the period 2016-17 was calculated as follows:-

2.5 As the appellant have suppressed material facts from the department by suppressing the gross value of services provided by them they have contravened the provisions of Chapter V of Finance Act, 1994 and Rules made thereunder with the intention to evade payment of due service tax. If the information as above was not received from the income tax department the fact of evasion of service tax would have remained unearthed. Therefore the proviso to section 73 (1) for making demand by invoking extended period of limitation was applicable in the facts of this case. For acts of various contravention and suppression of the value of services provided appellant was liable to penal action under Section 78 and 77(1)(C)(i)(ii)(iii) of the Finance Act, 19094.

2.6 Show cause notice dated 08.10.2021 was issued to the appellant asking them to show cause as to why:-

(i) The Service Tax amounting to Rs.91,08,575/- (Rupees Ninety One Lakh Eight Thousand Five Hundred Seventy Fiveonly) including various cess as applicable should not be demanded and recovered from them under proviso to Section 73(1) of the Act, 1994 read with Section 142, 173 & 174 of CGST Act, 2017.

(ii) The due interest on the amount of Service Tax mentioned at (i) above should not be demanded and recovered from them under Section 75 of the Finance Act, 1994 read with Section 142, 173 & 174 of CGST Act. 2017.

(iiii) Penalty should not be imposed upon them under Section 78 of the Finance Act 1994 read with Section 142, 173 & 174 of CGST Act, 2017 for failure to pay service tax & suppressing the facts and value of taxable service with intent to evade payment o service tax.

(iv) Penalty should not be imposed upon them under Section 77(1)(C)(i)(ii)(iii) o Finance Act, 1994 read with Section 142, 173 & 174 of CGST Act, 2017 for furnishing the information/ not producing the documents/not appearing when issued with a summon before a Central Excise officer.”

2.7 The said show cause notice was adjudicated as per the Order-in-Original dated 22.02.2024 referred in para 1 above, holding as follows:

“ORDER

(i) I confirm the demand of service tax amounting to Service Tax amounting to Rs. 23,55,263/-(Rupees Twenty Three Lakhs Fifty Five Thousands Two Hundred Sixty Three Only) under Section 73(1) of the Finance Act, 1994 read with Section 142, 173 and 174 of CGST Act, 2017. Since the Party have already deposited an amount of Rs.4,05,146/-, as Service Tax, therefore, said amount may be appropriated against the demand of Service Tax.

(ii) I drop the demand of Rs.67,53,312/- (Rs. 91,08,575- Rs. 23,55,263) under Section 73(1) of the Finance Act, 1994 read with Section 142, 173 and 174 of CGST Act, 2017 in terms of discussions held in foregoing paras.

(iii) I impose the due interest on the amount of Service tax mentioned at (i) above under Section 75 of the Finance Act, 1994 read with Section 142, 173 and 174 of CGST Act, 2017. Since the Party have already deposited an amount of Rs.3,51,541/-, as interest, therefore, said amount may be appropriated against the due interest.

(iv) I impose penalty of Rs. 23,55,263/- (Rupees Twenty Three Lakhs Fifty Five Thousands Two Hundred Sixty Three Only) upon the Party under Section 78 of the Finance Act, 1994 read with Section 142 and 174 of CGST Act, 2017. Since the Party have already deposited an amount of Rs. 1,01,287/-, as penalty, therefore, said amount may be appropriated against the penalty.

(v) I impose penalty of Rs. 10,000/- upon the Party under Section 77(1)(c)(i), (ii) & (iii) of the Act read with Section 142 and Section 174 of CGST Act, 2017.”

2.8 Aggrieved appellant have filed appeal before Commissioner (Appeals) which has been disposed as per the impugned order.

2.9 Aggrieved appellant have filed this appeal.

3.1 I have heard Shri Arun Srivastava, Advocate for the appellant and Shri Santosh Kumar, Authorized Representative appearing for the revenue.

3.2 Arguing for the appellant learned Counsel submits that-

> Show cause notice dated 20.11.2017 on the same issue and grounds have been issued to the appellant demanding service tax of Rs 1,91,26,956/- for the period 2012-2016 by invoking extended period of limitation. This show cause notice has been adjudicated confirming the demand made along with interests and penalty. The appeal (Dy No 954/2025) filed by the appellant in this case is pending before the tribunal.

> Be that as it may be the Show cause notice dated 08.10.2021 which has been issued to the appellant on the same grounds by invoking extended period of limitation will be barred by limitation.

> Reliance is placed on the decision of Hon’ble Supreme Court in the case of M/s Nizam Sugar Factory [2006 (197) E.L.T. 465 (S.C.)].

3.3 Authorized Representative reiterates the findings recorded in the orders of the lower authorities.

4.1 I have considered the impugned orders along with the submissions made in appeal and during the course of argument.

4.2 Impugned order records the findings as follows:-

“5.1 I have carefully gone through the case records and the documents submitted by the appellant. I find that there is a dispute of whether the gross receipt received against the services rendered in respect of Haj Pilgrims and Umara is taxable or not. Appellant refuted the allegation and filed the appeal.

5.2 1 find that Adjudicating Authority has decided the case in the light of the Judgment of the Hon’ble Supreme Court in the case of ALL INDIA HAJ UMRAH TOUR ORGANIZER ASSOCIATION MUMBAI wherein it has been held that the services rendered by the HGOs to Haj Pilgrims is taxable for service tax as the service to Haj pilgrims is provided or agreeing to be provided in taxable territory. The demand was confirmed by considering the services rendered by the appellant as tour operator.

5.3 On perusal of profit & loss account of the appellant I find that they have received the consideration in respect of three sectors namely Sales of Air Ticket, receipts from Umrah Ticket and receipt from Haj Pilgrimas under:-

5.4 I find that appellant has contested that the air fare is deductible from the gross amount received by them. Considering the submission of the appellant Adjudicating authority has deducted the air fare against the income “sales of air ticket and confirmed the demand of Service tax Rs. 235/- on the remaining amount Rs. 1800/- which has been accepted by the appellant. Hence, liability of Service tax on income in respect of receipts from Umrah Ticket & receipts from Haj Pilgrim is to be decided.

5.5 In respect of services rendered by the appellant for Umrah, they have contested that they have provided the sale of Air tickets by purchasing Air tickets from the Saudia Air Lines and other and same Air tickets were sold to the customers. In support they have produced the sample invoices raised by them as well as Airlines and ledger of Umrah Pilgrim Ticketing. On perusal I find that they charged the customers in two head one is Air fare cost to cost basis and other is service charges. I also find that the services rendered by them in this regard is as agent and air fare is exclusives from the gross receipts in terms of Rule 6(2) of Service tax Determination of value) Rules, 2006.

I find that they have purchased Air ticket in respect of Umarah for the amount of Rs. 3,53,73,999/-. This amount is deductible from the gross receipt of Umarah hence, value comes to the tune of Rs. 21,41,089/- Rs. 3,75,15,088/–Rs. 3,53,73,999/-). Appellant has contested that they have not charged the service tax from the client and in terms of Section 67(2) of the Act they are eligible for cum tax value. Hence, cum tax value comes to Rs. 18,61,817/- [21,41,089*100/115] on which appellant is liable to pay Service tax to the tune of Rs. 2,97,273/- Rs. 18,61,817/-@15%].

5.6 I find that adjudicating authority has confirmed the demand on Hajj receipt by treating the appellant as tour operator. In this regard, they have contested that they are not tour operator, they are working as agent and expenses incurred on air ticket, taxes etc. should be excluded for the purpose of valuation of Service tax. Further they submitted that they book the air ticket, and collect other expenses such as visa fee, muallim fee, accommodation chrges, foreign currency exchange charges which are reimbursed to the concerned agency on actual basis. They also submitted that Hajj date, duration, scheduling, accommodation, sight-seeing or any transportation at Saudi Arabia are decided by the Government of India. On perusal of bill raised by the appellant I find that appellant has collected the gross receipt as ‘package’ along with service charges hence it cannot be denied that they are Tour operator. They also failed to produce any substantive evidence that they are not working as tour operator. Therefore, I find that adjudicating authority has rightly assessed the Service tax Rs. 9,09,863/- against the gross receipt of Hajj.”

4.3 In the present case, I find that Show cause notice dated 08.10.2021 was issued for the period 2016-17 and another show cause notice dated 20.11.2017 was issued to the appellant on the same issue for the period 2012 -2016, on the same grounds. For computing the demand in the notice dated 20.11.2017 following computation table was made:

4.4 From the perusal of the above and comparison of the above the table with the table appended in the present show cause notice I observe that demand made in the present show cause notice is identically on the same grounds and on the basis of the similar documents. When the facts came in the knowledge of the department, while issuing the first show cause notice, then revenue could not have issued the second notice, invoking extended period of limitation. Hon’ble Supreme Court has in the case of Nizam Sugar Factory [2006 (197) E.L.T. 465 (S.C.)] held as follows:

8. Without going into the question regarding Classification and marketability and leaving the same open, we intend to dispose of the appeals on the point of limitation only. This Court in the case of P & B Pharmaceuticals (P) Ltd. v. Collector of Central Excise reported in (2003) 3 SCC 599 = 2003 (153) E.L.T. 14 (S.C.) has taken the view that in a case in which a show cause notice has been issued for the earlier period on certain set of facts, then, on the same set of facts another SCN based on the same/similar set of facts invoking the extended period of limitation on the plea of suppression of facts by the assessee cannot be issued as the facts were already in the knowledge of the department. It was observed in para 14 as follows :

“14. We have indicated above the facts which make it clear that the question whether M/s. Pharmachem Distributors was a related person has been the subject-matter of consideration of the Excise authorities at different stages, when the classification was filed, when the first show cause notice was issued in 1985 and also at the stage when the second and the third show cause notices were issued in 1988. At all these stages, the necessary material was before the authorities. They had then taken the view that M/s. Pharmachem Distributors was not a related person. If the authorities came to the conclusion subsequently that it was a related person, the same fact could not be treated as a suppression of fact on the part of the assessee so as to saddle with the liability of duty for the larger period by invoking proviso to Section 11A of the Act. So far as the assessee is concerned, it has all along been contending that they were not related persons, so, it cannot be said to be guilty of not filling up the declaration in the prescribed proforma indicating related persons. The necessary facts had been brought to the notice of the authorities at different intervals from 1985 to 1988 and further, they had dropped the proceedings accepting that M/s. Pharmachem Distributors was not a related person. It is, therefore, futile to contend that there has been suppression of fact in regard M/s. Pharmachem Distributors being a related person. On that score, we are unable to uphold the invoking of the proviso to Section 11A of the Act for making the demand for the extended period.”

This judgment was followed by this Court in the case of ECE Industries Limited v. Commissioner of Central Excise, New Delhi reported in (2004) 13 SCC 719 = 2004 (164) E.L.T. 236 (S.C.). In para 4, it was observed :

“4. In the case of M/s. P&B Pharmaceuticals (P) Ltd. v. Collector of Central Excise reported in [2003 (2) SCALE 390], the question was whether the extended period of limitation could be invoked where the Department has earlier issued show cause notices in respect of the same subject-matter. It has been held that in such circumstances, it could not be said that there was any wilful suppression or mis-statement and that therefore, the extended period under Section 11A could not be invoked.”

Similarly, this judgment was again followed in the case of Hyderabad Polymers (P) Ltd. v. Commissioner of Central Excise, Hyderabad reported in [2004 (166) E.L.T. 151 (S.C.)]. It was observed in para 6:

“……………….. On the ratio laid down in this judgment it must be held that once the earlier Show Cause Notice, on similar issue has been dropped, it can no longer be said that there is any suppression. The extended period of limitation would thus not be available. We are unable to accept the submission that earlier Show Cause Notice was for a subsequent period and/or it cannot be taken into consideration as it is not known when that Show Cause Notice was dropped. If the Department wanted to take up such contentions it is for them to show that that Show Cause Notice was not relevant and was not applicable. The Department has not brought any of those facts on record. Therefore, the Department cannot now urge that findings of the Collector that that Show Cause Notice was on a similar issue and for an identical amount is not correct.”

9. Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the assessee/appellant.

4.5 Delhi Bench has in the case of Vandana Global Ltd. [2022 (382) E.L.T. 247 (Tri. – Del.)] held as follows:

7. There is no denial for the fact that similar show cause notices have already been served upon the appellants for the previous years. Suppression of facts in those circumstances cannot be alleged. The decision of Hon’ble Apex Court in Nizam Sugar Factory (supra) case is absolutely clear that when all relevant facts were in knowledge of authorities at the time of first show cause notice, while issuing subsequent show cause notices on same/similar facts, suppression of facts on part of assesse cannot at all be alleged. In view of this, it is held that invocation of extended period of limitation has also been wrongly confirmed. Once there was no suppression question of imposition of penalty does not at all arise. Findings of Commissioner (Appeals) in Para 8 of the order under challenge are held beyond the aforesaid decision of the Hon’ble Apex Court.

4.6 In view of the above the demand made by invoking extended period of limitation by the show cause notice dated 08.10.2021 cannot be sustained. In view of the above, impugned order cannot be sustained and the same is set aside. 5.1 Appeal is allowed.

(Dictated and pronounced in open court)