Right Resource Management Service Vs Commissioner of Central Goods And Service Tax (CESTAT Delhi)
CESTAT Delhi held that demand invoking extended period of limitation unsustainable as demand is based on the records of the assessee or other records which DGCEI could obtain through income tax department. Scrutiny of such records should have been done within time limit.
Facts-
The assessee is registered with the Service Tax department for providing ‘Manpower supply Service’ and it has been paying service tax and filing ST-3 returns. Officers of the Directorate General of Central Excise Intelligence searched its premises on 30.3.2015 and after completing investigations, issued the aforesaid SCN.
Part of the demand in the SCN was beyond even the extended period of limitation of five years, which the Commissioner dropped in the impugned order and for part of the demand, giving the benefit of reckoning the amounts received as cum tax values, the Commissioner confirmed demand of only Rs. 99,34,381/- and dropped the rest of the demand.
Conclusion-
Held that the DGCEI discovered that some tax had escaped assessment and that the assessee does not dispute it on merits, it is equally true that the entire demand is based on the records of the assessee, some of which it produced and the other records which the DGCEI could obtain through the Income Tax department. Such a scrutiny could have been and should have been done by the Range officer with whom the Returns were filed and he was fully competent to call for any records from the assessee. Such scrutiny could also have been done by the audit team which audited its records. What is evident is that if some tax escaped assessment even after the Returns being filed with the Range Superintendent and despite the assessee was audited is that neither had done their job properly. We, therefore, are of the considered view that in this case, the demand only in respect of the normal period of limitation can be sustained.
FULL TEXT OF THE CESTAT DELHI ORDER
1. M/s Right Resource Management Service1 and the Revenue filed these cross appeals to assail Order-in-Original 2 dated 3.1.2018 passed by the Commissioner of Central Excise, Dehradun whereby he decided the Show Cause Notice 3 dated 18.4.2017 issued by the Directorate General of Central Excise Intelligence4, Lucknow proposing recovery of service tax of Rs. 2,81,34,607/- from the assessee for the period 2010-11 to 201415 under section 78 of the Finance Act, 19945 invoking extended period of limitation along with interest under section 75. The SCN also proposed to impose penalties upon the assessee under sections 77 and 78 and late fee under section 70 of the Act.
2. The assessee is registered with the Service Tax department for providing ‘Manpower supply Service’ and it has been paying service tax and filing ST-3 returns. Officers of the Directorate General of Central Excise Intelligence6 searched its premises on 30.3.2015 and after completing investigations, issued the aforesaid SCN. Part of the demand in the SCN was beyond even the extended period of limitation of five years, which the Commissioner dropped in the impugned order and for part of the demand, giving the benefit of reckoning the amounts received as cum tax values, the Commissioner confirmed demand of only Rs. 99,34,381/- and dropped the rest of the demand. He, however, confirmed the demand within the extended period of limitation of five years which can be invoked only if the short payment of tax is by reason of fraud or collusion or willful mis-statement or suppression of facts or violation of the provisions of the Act or the Rules with intent to evade payment of duty.
3. Service Tax Appeal 50384 of 2018 is filed by the assessee assailing the confirmation of the part of the demand and imposition of penalties.
4. Service Tax Appeal 51364 of 2018 is filed by the Revenue assailing dropping of the part of the demand. It also seeks confirmation of the interest on that part of the demand and consequent enhancement of the penalty imposed under section 78.
Submissions of the assessee
5. Learned counsel for the assessee made the following submissions:
a) The demand of Rs. 99,34,381/- was confirmed in the impugned order by invoking best judgment assessment under section 72 of the Act which was not invoked in the SCN.
b) Giving reasons for invoking the best judgment assessment, it has been wrongly alleged in paragraph 6 of the SCN that the assessee had not provided the requisite information/ documents such as Form 26AS, balance sheets and copies of the bills issued by it. All these documents, except the bills which are voluminous, were resumed by the officers during search on 30.3.2015 itself. Only Form 26AS for the period 2010-11 and 2011-12 of the assessee were obtained by the officers from the Income Tax department. Form 26AS is generated by the Income Tax department based on TDS returns filed by third parties.
c) Since the officers were issuing repeated letters and summons and harassing the assessee and had also demanded a bribe, the assessee complained to the CBI who filed an FIR a copy of which is at page 229 of the paper book.
d) The assessee had calculated its tax liability as Rs. 24,73,553/- based on Form 26AS figures.
e) There were no grounds to invoke extended period of limitation of five years in the case. The SCN incorrectly alleged suppression of true taxable value and wilful mis-declaration of taxable value which have been upheld in the impugned order.
f) The normal period of limitation under section 73 was 18 months upto 13.5.2016 and thereafter, it was extended to 30 months. The question of applicability of the amended period of limitation to the past cases was examined by the Supreme Court in UOI vs Uttam Steel7 and it was held that’ There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself have been a dead claim in the sense that it was time barred before an Amending Act with a larger period of limitation comes into force.’ Applying this ratio, the demand upto September 2014 was time barred under the old provision of 18 months on 25.4.2016. The only demand which survives is for the period 1.10.2014 to 31.3.2015 against which the assessee had deposited service tax of Rs. 50,51,636/- along with interest of Rs. 4,50,000/-.
g) Penalty under section 78 should not be imposed as the elements fraud or collusion or willful mis-statement or suppression of facts or violation of the provisions of the Act or the Rules with an intent to evade payment of duty which are essential to impose the penalty under section 78 were not present.
h) Penalty under section 77 (1)(c) was imposed on the assessee for failure to appear for appearance on five dates against summons and produce the desired documents. These documents were already with the department and hence they were not provided and nor had the assessee appeared and instead complained to the CBI who filed an FIR in the matter. Penalty under section 77(1) (c) cannot exceed Rs. 10,000/- in any case.
i) Penalty under section 77(2) was arbitrarily imposed and needs to be set aside.
j) To sum up, the officer could not have resorted to best judgment assessment in the present case, extended period of limitation could not have been invoked, the demand within the normal period of limitation may be liable to be confirmed and the penalties under sections 77(1)(c), 77(2) and 78 are not imposable.
Submissions on behalf of the Revenue
6. Learned authorised representative for the Revenue submitted as follows:
a) The assessee had failed to provide the required documents during investigation despite repeated letters and summons and therefore, the department had done the valuation on the basis of the documents which were available and those which were received from income tax department such as Form 26AS as per the best judgment under section 72.
b) The adjudicating authority, however, erred in holding that the period April 2010 to September 2011 was beyond five years and hence was hit by limitation on the ground. Where no ST-3 return is filed by the due date, the relevant date to calculate the limitation is the last date on which such return should have been filed and not the actual date of filing the return. In this case, the assessee filed the returns much after the due date and if the date of actual filing of returns is considered, the demand for the period April 2010 to September 2011 would fall within the extended period of limitation. The relevant dates are as follows:
