Power Spectrum Sarbidipur Vs Union of India (Patna High Court)
Patna High Court has set aside a service tax demand order exceeding ₹14 lakh against Power Spectrum Sarbidipur, a maintenance and repair service provider. The court’s decision hinged on the significant delay by the tax authorities in issuing the final adjudication order after the show cause notice, deeming the delay violative of statutory timelines and established legal principles.
The case originated when Power Spectrum, a proprietorship firm registered under Service Tax Laws, received a demand-cum-show cause notice (SCN) on September 5, 2018. The notice alleged that the firm had received payments from customers during the financial years 2012-13 to 2016-17 but had deliberately evaded proper assessment and payment of service tax, including applicable cesses. Specifically, the SCN highlighted that the firm had received ₹1,14,15,052 under Section 194C of the Income Tax Act, 1961 (which deals with tax deduction at source on payments to contractors) during 2012-13 and 2013-14, and the service tax paid for those years did not align with these receipts. The SCN demanded service tax amounting to ₹14,10,900 for the years 2012-13 and 2013-14, with amounts for subsequent years to be calculated later.
The tax authorities issued the SCN invoking the extended period of limitation available under the proviso to Section 73(1) of the Finance Act, 1994. This extended period, typically five years from the relevant date, is applicable in cases involving allegations of fraud, collusion, willful misstatement, suppression of facts, or contravention of rules with intent to evade tax. The normal period for issuing an SCN under Section 73(1) was significantly shorter (thirty months at the time).
