Case Law Details
Principal Commissioner of Central Tax Vs Adarsh Developers (Karnataka High Court)
Karnataka High Court held that department was aware about the facts while issuing first show cause notice. Hence, no suppression can be held against the appellant and invoked while raising demand for subsequent period. Accordingly, allegation of suppression of facts not sustained.
Facts-
The respondent – Assessee was issued with a show cause notice dated 19.10.2012 by the Office Of Commissioner Of Service Tax requiring the Assessee to furnish balance sheets for the period from 2007-08 to 2011-12 and various other documents for the said period. The Assessee responded to the said show cause notice and furnished certain documents. Subsequently, vide Order-In-Original dated 31.03.2016 which was issued on 27.04.2016 it was held that the Assessee had suppressed the facts with intent to evade payment of service tax within the meaning as provided under the proviso to Section 73(1) of the Finance Act, 1973 and further it was held that the assessee is liable to pay applicable interest on the service tax payable for the said periods.
Being aggrieved, the assessee preferred an appeal before the Appellate Tribunal. Tribunal partly allowed the appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion-
Hon’ble Supreme Court, in the case of Nizam Sugar Factory, has held that 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.
Held that the said finding recorded by the Appellate Tribunal is contrary to any specific material on record. The Appellate Tribunal has considered the aspect of suppression from the proper perspective and noticing the settled position of law, has rightly held that the aspect of suppression cannot be attributed to the Assessee.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The present appeal is filed by the Revenue under Section 35G of the Central Excise Act, 1944 challenging the final order No.21191/2019 dated 29.11.2019 passed in the appeal No.ST/21725/2018-DB, by the Customs, Excise and Service Tax Appellate Tribunal, South Zone Bench, Bangalore1.
2. The relevant facts necessary for consideration of the present appeal are that the respondent – Assessee was issued with a show cause notice dated 19.10.2012 by the Office Of Commissioner Of Service Tax, Service Tax Commensurate, Bengaluru, requiring the Assessee to furnish balance sheets for the period from 2007-08 to 2011-12 and the various other documents for the said period. The Assessee responded to the said show cause notice and furnished certain documents. Subsequently, vide Order-In-Original dated 31.03.2016 which was issued on 27.04.2016 it was held that the Assessee had suppressed the facts with intent to evade payment of service tax within the meaning as provided under the proviso to Section 73(1) of the Finance Act, 1973 and further it was held that the assessee is liable to pay applicable interest on the service tax payable for the said periods. Being aggrieved, the assessee preferred an appeal before the Appellate Tribunal. The Appellate Tribunal, by its final order dated 29.11.2019 passed the following order:
“i) Demand under ‘Construction of Residential Complex’ is held to be time barred. Demand in respect of Construction of Villas is set aside.
ii) Demand under ‘Construction of Residential Complex’ on construction of complexes other than Villas is sustained for the period of 01.04.2011 to 31.03.2012 and remanded back to the original authority for re-quantification in terms of the discussion.
iii) Demand under ‘Consulting Engineer’s Service’ has been accepted by the appellants.
iv) Penalty imposed under Section 78 of Finance Act, 1962 is set aside Penalty imposed under Section 76 is sustained.”
3. Being aggrieved, the present appeal is filed by the Revenue.
4. This Court, vide order dated 26.02.2021 admitted the above appeal and framed the following substantial questions of law;
“a) Whether the CESTAT was right in dropping the demand for extended period in respect of Construction of Residential Complex Service (for the period from 07/2010 to 03/2012) (other than Villas) by stating that there is no suppression, when the assessee has not declared the correct value of taxable services vis-à-vis the figures shown in the Balance Sheet.
b) Whether the CESTAT was right in setting aside the penalty under Section-78 of the Finance Act, 1994 in respect of Construction of Residential Complex Service (other than Villas) provided by them for the period – 07/2010 to 03/2012?”
5. Learned standing Counsel Smt. Vanita K.R for the Appellant/Revenue, vehemently contended that the respondent is guilty of suppression and that the Appellate Tribunal has erroneously relied on the judgment of the Hon’ble Supreme Court in the case of Nizam Sugar Factory v. CCE2 and held that they are not guilty of suppression. Further, it is contended that the earlier show cause notice was issued for a completely different purpose and had no relation to the present show cause notice issued. Hence, she seeks for allowing of the present appeal and setting aside of the order passed by the Appellate Tribunal.
6. Per contra, learned counsel Sri. Cherian Punnoose for the Assessee, justifies the order passed by the Appellate Tribunal and submits that the case of suppression has been rightly appreciated by the Appellate Tribunal and the above appeal is liable to be dismissed.
7. The submissions of both the learned counsels have been considered and the material on record has been perused. The substantial question of law that has been framed by this Court is regard to the aspect of suppression by the Assessee.
8. Considering the aspect of suppression the Appellate Tribunal has noticed that the assessee was issued with show cause notice dated 02.07.2007 for the period 16.06.2005 to 31.12.2006. The said show cause notice was confirmed by order in original Sl.No.3/2011 dated 31.01.2011. Vide final order No.20942-20943/2018 dated 04.07.2018/10.07.2018, the Appellate Tribunal decided in favour of the Respondent/Assessee and held the Respondent was not required to pay service tax for construction service before 01.07.2010.
9. It is contention of the Respondent/Assessee that having regard to the fact that the earlier show cause notice dated 02.07.2007 was issued which has culminated in the order of the Appellate Tribunal holding in favour of the Assessee, the question of alleged suppression for the subsequent period of 01.04.2007 to 31.03.2012 does not arise.
10. In the case of Nizam Sugar Factory2 , the Hon’ble Supreme Court has held as follows:
“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.”
(emphasis supplied)
11. The Appellate Tribunal has considered the aspect regarding suppression and in its order dated 29.09.2019 has held as follows:
“The appellants submits that prior to the present proceedings, Revenue issued another show cause notice to the appellants which came to be confirmed by Order-in-Original Sl.No.3/2011 dated 31.01.2011; this bench, vide Final Order No.20942-20943/2018 dated 04.07.2018/10.07.2018, decided in favour of the appellants and held that the appellants were not required to pay any service tax for the construction services before 01.07.2010. Department was well award of the activities and transactions while issuing the first show cause notice itself. Therefore, no suppression could be held against the appellants and invoked while raising demand for the subsequent periods. We find that extended period cannot be invoked in subsequent SCN, more so, when the first SCN itself was issued invoking extended period. We rely on Nizam Sugar Factory Vs CCE, A.P. 2008 (9) STR 314 (SC). Therefore, we hold that the demand is hit by limitation and therefore, the demand raised for the period 01.04.2007 to 31.03.2011 is not sustainable.”
(emphasis supplied)
12. In view of the aforementioned, it is clear that the Appellate Tribunal has considered the relevant aspect of the matter and noticing the judgment of the Hon’ble Supreme Court in the case of Nizam Sugar Factory2 has held that the question of suppression cannot be invoked against the Assessee.
13. The appellant has failed in demonstrating that the said finding recorded by the Appellate Tribunal is contrary to any specific material on record. The Appellate Tribunal has considered the aspect of suppression from the proper perspective and noticing the settled position of law, has rightly held that the aspect of suppression cannot be attributed to the Assessee.
14. In view of the aforementioned, the substantial question of law No.1 is answered in the affirmative i.e., in favour of the Assessee and against the Revenue. The substantial question of law No.2 is consequential to substantial question of law No.1 and hence, the substantial question of law No.2 is also answered in the affirmative, against the Revenue and in favour of the Assessee.
15. In view of the aforementioned, the above appeal filed by the Revenue is liable to be dismissed as being devoid of merit. Hence the following:
ORDER
i) The above appeal is dismissed;
ii) The final order No.21191/2019 dated 29.11.2019 passed in the appeal No.ST/21725/2018-DB, by the Customs, Excise and Service Tax Appellate Tribunal, South Zone Bench, Bangalore, is affirmed.
No costs.
Notes:
1 Hereinafter referred to as ‘Appellate Tribunal’
2 A.P. 2008 (9) STR 314 (SC)
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