Department cannot invoke extended period without proving suppression of fact

The CESTAT, New Delhi in the matter of M/s. Mount Everest Breweries Limited v. Commissioner of CGST & Central Excise [Service Tax Appeal No. 50145 of 2019 dated July 03, 2023] held that the assessee had not suppressed any facts and thus, extended period of limitation cannot be invoked.

Facts:

M/s. Mount Everest Breweries Limited (“the Appellant”) is engaged in the business of manufacturing, brewing, and bottling of alcoholic beverages. The Appellant entered into an agreement with United Breweries Limited (“UBL”) for manufacturing beer of brands owned by UBL.

A Show Cause Notice dated July 07, 2014 (“the SCN”) was issued to the Appellant for the period from September 2009 to June 2012 alleging that the transaction between the Appellant and UBL was taxable under the category of Business Auxiliary Services (“BAS”) as defined under section 65(19) of the Finance Act, 1994 (“the Finance Act”) and made taxable under section 65(105)(zzb) of the Finance Act.

The Appellant filed a reply to the SCN stating that the Appellant was always been genuine in their practices and since the agreement with UBL was purely of a manufacturing agreement, and thus, the Appellant was of the view that there should be no levy of service tax.

The Revenue Department passed an Order dated August 21, 2018 (“the Impugned order”) and held that the Appellant was liable to pay service tax.

Aggrieved by the Impugned Order, the Appellant filed an appeal before the CESTAT.

Issue:

Whether suppression of fact need to be wiful in order to attract penalty?

Held:

The CESTAT, New Delhi in Service Tax Appeal No. 50145 of 2019 held as under:

• Observed that, section 73 (1) of the Finance Act does not mention that suppression of facts has to be ‘willful’ since the word ‘willful’ precedes only misstatement, therefore, it is to be seen whether even in the absence of the expression “willful” before the term “suppression of facts” under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax.
• Relied upon the judgement of Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals Company [1995 (78) E.L.T. 401 (SC)] wherein the court while dealing with the meaning of the expression “suppression of facts” held that the term must be construed strictly. It does not mean any omission, the act must be deliberate and willful to evade payment of duty.
• Stated that, the Revenue Department had passed the order without examining the facts and a mere conclusion had been drawn that there was suppression of facts by the Appellant and the suppression was with an intent to evade payment of service tax.
• Held that, the Impugned order holding that the extended period of limitation has been correctly invoked cannot be sustained and is set aside.

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