Case Law Details
M.K. Enterprises Vs Commissioner of CGST & CX (CESTAT Kolkata)
CESTAT Kolkata held that the extended period of limitation cannot be invoked in subsequent show cause notice, where the Department has earlier issued Show Cause Notice in respect of the same subject-matter.
Facts- The Appellant is engaged in providing services to IOCL and such services are ‘taxable services’ under Chapter V of the Finance Act, 1994 under the category ‘Works Contract Service’, ‘Maintenance & Repair Service’, ‘Manpower Recruitment/Supply Service’ and ‘Cleaning Service’. It is the case of the Service Tax department that the Appellant have not filed their ST-3 returns on time and have not paid Service Tax on the entire consideration received from IOCL for the period impugned in the current proceeding.
Thus, the Show Cause Notice was issued to the Appellant seeking payment of Service Tax on the entire value received from IOCL as per Form 26AS and Balance sheet for the impugned period by applying the highest rate of Service Tax and without describing the nature of services provided by the Appellant as well as without considering the payments made by the Appellant as service tax for the said period and by invoking extended period of limitation by alleging suppression of facts by the Appellant.
Notably, entire demand was confirmed, without allowing any abatement. Further, interest was levied and equal penalty was imposed u/s 77. Being aggrieved, the present appeal is filed.
Conclusion- Hon’ble Supreme Court in the case of Nizam Sugar Factory Vs. Collector of Central Excise has held that when the first Show Cause Notice was issued, all the relevant facts were in the knowledge of the authorities. Later on, while issuing the Show Cause Notice for a subsequent period on the same issue, then the identical/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 extended period of limitation cannot be invoked where the Department has earlier issued Show Cause Notice in respect of the same subject-matter.
We find from the Chartered Accountant’s certificate that the entire value as per form 26AS has suffered tax to the extent of supplies taxable under forward charge and only GTA services provided by the Appellant has not suffered tax at the hands of the Appellant as the recipient was liable to pay Service Tax on the same. The Ld.Authorized Representative has not been able to make out a case that the services of works contract as provided by the Appellant are not allowed abatement as claimed by the Appellant or otherwise that such services were not provided by the Appellant. Thus, at this juncture having regard to the various reconciliations submitted and the Chartered Accountant’s certificate produced, we are of the view that the amounts as per form 26AS has suffered service tax at the hands of the Appellant.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present appeal has been filed by the Appellant M/s. M K Enterprises against the Order passed by the Ld. Commissioner, CGST & CX, Patna covering the period from October 2011 to March 2016.
2. The Appellant is engaged in providing services to Indian Oil Corporation Ltd (hereinafter referred to as “IOCL”) and such services are ‘taxable services’ under Chapter V of the Finance Act, 1994 under the category ‘Works Contract Service’, ‘Maintenance & Repair Service’, ‘Manpower Recruitment/Supply Service’ and ‘Cleaning Service’. It is the case of the Service Tax department that the Appellant have not filed their ST-3 returns on time and have not paid Service Tax on the entire consideration received from IOCL for the period impugned in the current proceeding. Thus, the Show Cause Notice was issued to the Appellant seeking payment of Service Tax on the entire value received from IOCL as per Form 26AS and Balance sheet for the impugned period by applying the highest rate of Service Tax and without describing the nature of services provided by the Appellant as well as without considering the payments made by the Appellant as service tax for the said period and by invoking extended period of limitation by alleging suppression of facts by the Appellant.
3. The Appellant had replied to the Show Cause Notice highlighting that it had already paid the entire Service Tax dues and had submitted reconciliation of the amounts paid. It was also stated that the Appellant was entitled to abatement on various services such as GTA, works contract etc. which has not been considered by the department. It was further stated that the entire demand is barred by limitation as for the period 2010-11 and 2011-12 on the self same issue, a Show Cause Notice dated 22.05.2015 was issued by invoking extended period of limitation which culminated into a demand order dated 23.08.2016 and in the first appeal, the demand was set aside in favour of the Appellant vide Appeal Order dated 30.11.2018 and on further appeal before the Tribunal by the department, the same was dismissed under National Litigation Policy.
4. The Ld. Adjudicating authority was however of the view that since the Appellant has suppressed the information from the department by way of non- filing of ST 3 returns, extended period was invocable in the present case. However no observation was made on the payments made by the Appellant during the impugned period as per details given in reply to the Show Cause Notice. Further, no abatement was allowed on any services and thus the entire demand of Rs.3,73,32,890/- came to be confirmed along with interest and equal penalty under section 77 of the Act was imposed as also late fee for delay in filing of ST-3 returns. Aggrieved by the impugned order, the Appellant is in Appeal before the Tribunal.
5. The Ld. Advocate appearing on behalf of the Appellant has vehemently argued that the entire demand is barred by limitation as the Department had conducted review of its records based on IOCL Barauni details for FY 2010-11 and 2011-12 and the said order has attained finality wherein the entire demand was dropped by the Ld.Commissioner (Appeals), Patna and the Department’s appeal before the Tribunal was dismissed under National Litigation Policy. Further, as regards merit of the case, the Ld. Advocate argued that though it is admitted that the Appellant had delayed in filing of returns and payment of taxes, however the taxes have since been paid with interest before passing of the adjudication order and all the calculations in this respect were submitted before the authority. He further states that the Ld. Adjudicating authority has ignored all the calculations for payment of Service Tax and has just applied the rate of Service Tax on income as per 26AS to confirm the demand of tax along with interest and penalty. Even no appropriation towards taxes paid has been done by the Ld. Adjudicating authority and thus the entire demand is bad and the order has to be quashed. The Ld.Advocate has also submitted a Chartered Accountant’s certificate for payment of Service Tax as per 26AS along with reconciliation statement.
6. The Ld.Authorized Representative, appearing on behalf of the Department, while supporting the Order-in-Original has stated that the Appellant had submitted the copy of ST-3 returns for the first time before the Tribunal and that the Ld.Adjudicating authority had no opportunity to verify the payments made by the Appellant. He further states that the Appellant had made payment of Service Tax and filed the ST 3 returns much after the issuance of Show Cause Notice, which goes to show that the Appellant had accepted the allegation of non payment of taxes. The Ld. Authorized Representative further stated that the value of taxable service as per Show Cause Notice and as per ST-3 returns submitted by the Appellant does not match and thus the difference has to be explained and is not reconciled. As regards the demand being time barred on the ground of limitation, the Ld. Authorized Representative stated that the facts of the earlier period of 2010-11 matter was as regards Service Tax collected but not paid by the Appellant whereas the current Show Cause was for non-payment of Service Tax and hence the question of Department being in the know-how of the Appellants modus operandi is not correct and the extended period was correctly invoked in the present case. The Ld. Authorized Representative also referred to judgments in this regard to differentiate the judgment of Nizam Sugar Factory [2006 (197)ELT 465(SC)] as referred to by the Appellant.
7. Heard both sides and perused the Appeal records along with additional submissions as provided by both the Appellant as well as the Department.
8. Before going into other aspects, it is important for us to see whether the submissions of the Appellant on the ground of invocation of extended period of limitation is sustainable in the present case.
9. The Appellant had stated during arguments that the entire demand was confirmed by the Department on the basis of the audit report of the IOCL which is a third-party information and the Income Tax Department’s information viz. form 26AS of the Appellant. Therefore, the entire mechanism adopted by the Department to confirm the demand is incorrect and unreasonable.
10. From the records it is seen that a Show Cause Notice dated 22.05.2015 was already issued to the Appellant for an earlier period viz. 2010-11 and 2011-12 on the issue of non-payment of Service Tax by invoking the extended period of limitation which has attained finality in terms of Tribunal’s Final Order dated 22.11.2019 dismissing Department’s appeal under National Litigation Policy. Further in the said case, the Ld. Commissioner (Appeals) had decided the matter in favour of the Appellant by considering all the submissions as to abatement and reverse charge (RCM) on services provided by the Appellant as well as the payments made during the said period.
11. We find that the present Show Cause Notice is also based on the data collected by the Department during IOCL CERA audit for all contractors and basis the payments made by IOCL to various contractors, the demand has been raised in the impugned proceedings also.
12. At this juncture we would like to refer to the judgment of Nizam Sugar Factory Vs. Collector of Central Excise [2006 (197) ELT 465], wherein the Hon’ble Supreme Court held that when the first Show Cause Notice was issued, all the relevant facts were in the knowledge of the authorities. Later on, while issuing the Show Cause Notice for a subsequent period on the same issue, then the identical/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.
13. We also find that the Hon’ble Supreme Court in the case of ECE Industries Limited v. Commissioner of Central Excise, New Delhi [MANU/SC/1138/2003], had held that the extended period of limitation cannot be invoked where the Department has earlier issued Show Cause Notice in respect of the same subject-matter. It could not be said that there was a willful suppression or mis-statement. Then, the extended period of limitation cannot be invoked.
14. We find that the Hon’ble High Court of Bombay in Commissioner of Central Excise and Customs Vs. Mahindra & Mahindra Ltd. [MANU/MH/0128/2018] held that the subsequent Show Cause Notices which were issued for the later period seeking to recover amounts beyond the normal period of limitation, were held to be barred by limitation on the reasoning that the suppression was detected long back prior to the exhaustion of the normal period of limitation. It was further held that the Revenue should have been vigilant and not negligent and issued the Show Cause Notices promptly. It allowed the normal period to lapse and thereafter issued the subject-notices. The Revenue could not cover up its own fault or error by such erroneous application of law.
15. As regards the judgment referred to by the department in their written submissions in the case of M M Cylinders (P) Ltd. Vs CCE, Tirupathi [2012 (277) ELT 78 (Tri- Bang)], the same is not applicable to the facts of the present case as in that case the further investigations had revealed new details, whereas in the present case both the notices are based on third party IOCL records and then comparing the same with 26AS data of the Appellant. Hence we cannot agree with the argument put forth by the Revenue that the judgment of Nizam Sugar Factory (supra) is not applicable to the facts of the present case.
16. We find that the ratio of the above judgments are squarely applicable in the instant case of the Appellant as the Appellant had been providing same services as was alleged in the earlier Show Cause Notice dated 22.05.2015 which was adjudicated in favour of the Appellant for the earlier period. It is not the case of the Department that there was any change in the nature of services provided by the Appellant and thus when the first Show Cause Notice was issued invoking extended period of limitation, it cannot be alleged that the Appellant has suppressed facts while issuing demand notices for subsequent period.
17. Thus, in our considered view, the impugned Order-in-Original arising against the said Show Cause Notice which is issued by the Department for a subsequent period by invoking the extended period of limitation is unsustainable and is liable to be quashed on this ground itself and we order accordingly. However, the Appellant is liable to pay the late fee for filing of ST-3, if not already paid.
18. Even though we are of the view that the extended period of limitation cannot be invoked in the present case, on merits we find that the department has grossly erred in not taking into account the payments made by the Appellant as well as submissions for provision of services having abatement as well as falling under reverse charge mechanism. We find that the ST-3 returns disclosing the payment of tax had been filed by the Appellant belatedly, but before passing of the adjudication order, the same was communicated to the Department by the Appellant. However, the Ld. Adjudicating authority has not taken it on record as the same was filed belatedly. In this regard we are of the view that though the Appellant had filed the ST-3 belatedly, but the same had clearly accounted for all the value of taxable services provided by the Appellant. The Ld. Authorized Representative for the Department during the course of arguments has also accepted that there is no difference in the value of services as per 26AS and as per the reconciliation statement provided by the Appellant in its submissions. The Ld. Authorized Representative in fact had sought time during the arguments to verify the documents as submitted by the Appellant and the reconciliation statements. We find from the Chartered Accountant’s certificate that the entire value as per form 26AS has suffered tax to the extent of supplies taxable under forward charge and only GTA services provided by the Appellant has not suffered tax at the hands of the Appellant as the recipient was liable to pay Service Tax on the same. The Ld.Authorized Representative has not been able to make out a case that the services of works contract as provided by the Appellant are not allowed abatement as claimed by the Appellant or otherwise that such services were not provided by the Appellant. Thus, at this juncture having regard to the various reconciliations submitted and the Chartered Accountant’s certificate produced, we are of the view that the amounts as per form 26AS has suffered service tax at the hands of the Appellant.
19. In view of the above discussions, it is our considered view that the impugned order cannot be sustained and is accordingly set aside. The Appeal filed by the Appellant succeeds both on merits as well as on limitation.
(Order pronounced in the open court on 08 June 2023.)
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