Mere suppression of facts not enough for invoking extended period of limitation

Dinesh Chandra R Agarwal Infracon Pvt Ltd Vs Commissioner of CGST & C.Ex – Gandhinagar (CESTAT Ahmedabad)

CESTAT Ahmedabad held that mere suppression of facts is not enough for invoking extended period of limitation. There must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty.

Facts-

The appellant participated in a tender floated by Military Engineer Services, Ministry of Defense, Government of India for resurfacing of runaway and aircraft operating areas Suratgarh in the state of Rajasthan. The appellant submitted the bid for the tender on 14^th June 2016 and they were declared as a successful bidder. The Chief Engineer issued the letter of acceptance in favour of the appellant on behalf of the President of India.

The appellant entertained a view that their services provided to the Chief Engineer, Military Engineer Services is exempted from payment of service tax vide the notification number 25/2012-ST dated 20.06.2012 as amended from time to time.

Based on the intelligence, an inquiry was initiated against the appellant regarding difference in taxable value declared in the service tax returns filed by them as compared to the revenue shown in their financial statements. On conclusion of the investigation, show cause notice was issued to the appellant on the ground that appellant are not eligible for exemption under Notification No. 25/2012-ST dated 20.06.2012 as amended and also has misdeclared or suppressed the value of the taxable services.

The show cause notice alleged suppression on the part of the appellant and invoked the extended period of limitation as provided for in the first proviso to section 73(1) of the Finance Act, 1994. Commissioner confirmed the demand of service tax on the appellant. Being aggrieved, the present appeal is filed.

Conclusion-

Mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax.

Held that learned Commissioner has not given any ground to show that there was a deliberate attempt on the part of the appellant to suppress or to miss declare the value of service. Ld. Commissioner has not even examined the various ingredients for invocation of extended period of limitation as provided in first proviso to section 73(1) of the Finance Act 1994.We observe that on the basis of the above analysis of Section 73(1) of the Finance Act, 1994 and various decision of these tribunal and settled principle of law we are of the clear view that the demand of service tax in the present matter beyond the period of limitation is not sustainable. We observe that the demand in the present matter is for the period 2016-17 and April 2017 to June 2017 and the show cause notice is issued on 27.08.2020. Therefore the entire demand is liable to be set aside on the ground of limitation

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

The present appeal has been filed by the Appellant against the order in original having number AHM-EXCUS-003-COM-001-23-24 dated 19.05.2023 wherein the demand of service tax of Rs.6,89,26,964/- has been confirmed along with interest and penalty.

2.1 The brief facts of the matter are as under.

2.2 The appellant participated in a tender having number CA NO CE WAC/SUR/T-34/2014-15 floated by Military Engineer Services, Ministry of Defense, Government of India for resurfacing of runaway and aircraft operating areas Suratgarh in the state of Rajasthan. The appellant submitted the bid for the tender on 14th June 2016 and they were declared as a successful bidder. The Chief Engineer, (AF) WAC, Military Engineer Service, Palam, Delhi Cantt issued the letter of acceptance dated 14.06.2016 in favour of the appellant on behalf of the President of India.

2.3 The appellant entertained a view that their services provided to the Chief Engineer, Military Engineer Services is exempted from payment of service tax vide the notification number 25/2012-ST dated 20.06.2012 as amended from time to time.

2.4 Based on the intelligence inputs received by the Directorate General of Goods and Service Tax Intelligence, Ahmedabad, an inquiry was initiated against the appellant regarding difference in taxable value declared in the service tax returns filed by them as compared to the revenue shown in their financial statements. On conclusion of the investigation, show cause notice dated 27th August 2020 was issued to the appellant on the ground that appellant are not eligible for exemption under Notification No. 25/2012-ST dated 20.06.2012 as amended and also have misdeclared or suppressed the value of the taxable services. The show cause notice alleged suppression on the part of the appellant and invoked the extended period of limitation as provided for in first proviso to section 73(1) of the Finance Act, 1994.

2.5 The appellant submitted the reply to the said show cause notice. However, Learned Commissioner of Central Tax, Gandhinagar confirmed the demand of service tax on the appellant.

3. We have heard Mr. Jigar Shah and Mr. Amber Kumrawat, Learned Advocates for the Appellant and also heard Mr. Rajesh Nathan Learned Authorized Representative of the revenue. On perusal of the records and considering the arguments advanced by the Learned Advocates we find that the Appellant have largely contested the matter on the grounds that they are eligible to claim exemption under Notification No. 12/2012-ST dated 20.06.2012, and in any case the Appellant have supported the Government of India in discharge of its sovereign function and therefore, the demand of service tax is not sustainable. The Appellant have also argued the matter on the grounds of revenue neutrality and limitation.

3.1 The appellant have relied on various decisions wherein the service providers have provided services to the government and the demand of service tax was raised under business auxiliary services, business support services, photography services etc. Few of the decisions cited by the appellant are mentioned below:

• Virgo Softech Ltd. – 2018 (9) GSTL 274 (Tribunal)
• Ankit Consultancy Ltd. 2007 (6) STR 101 (Tribunal)
• Smart Chip Ltd. 2015 (39) STR 197 (MP)
• UTI Technology Service Ltd. 2012 (26) STR 148 (Tribunal)
• S. Software Enterprises Ltd. 2008 (10) STR 367 (Tribunal)

3.2 During the course of arguments the appellant have heavily relied on the

judgment of this tribunal in case of Rosmerta Technologies Limited reported in 2019 [11] TMI-1573-CESTAT=2019-VIL-466-CESTAT-DEL-ST where the assessee provided the services to Government of Maharashtra for computerization of motor vehicle registration certificates. Division bench of this tribunal in case of Rosmerta Technologies supra observed as under:

17. The submission of the learned Counsel for the Appellant is that in such circumstances, the Department cannot agitate that the Appellant is liable to pay Service Tax under BAS. To support this contention, learned Counsel has placed reliance upon a decision of Allahabad Bench of this Tribunal in Shri Niraj Prasad vs. CCE & ST, Kanpur – 2019-VIL-804-CESTAT-ALH-ST. In the aforesaid case, it was sought to be submitted by the Appellant that the Department cannot be allowed to discriminate between various assesses on the same issues. A view was taken that the centres of the Appellant would not be required to pay Service Tax under BAS, if Service Tax had been paid on the entire amount by the agency. This submission was made in view of the order dated 25 October 2012 passed by the Commissioner (Appeals), which order had attained finality. It is in this context that the Tribunal held that once the Department has permitted the order to attain finality, it cannot be permitted to contend that the Appellant should also be required to pay Service Tax on BAS and to arrive at this conclusion, reliance was placed on the decision of the Supreme Court in Damodar J Malpani vs. CCE – 2002 (146) E.L.T. 483 (S.C.) – 2002-VIL-32-SC-CE, wherein it was held:

3. It appears from the records that several letters were written by the Appellant to the Excise Authorities requesting that a sample of the Appellant product may be chemically analysed at the Appellant cost for the purpose of determining whether the Appellant product or process in any way differed from the product and process of M/s. Chandulal K. Patel and Company. However, the Excise Authority decided against the Appellant without heeding such request. On 4-8- 88 a decision was taken by the Assistant Collector to classify the Appellant product under Tariff Heading 24.04. On 11-8-88 a sample of the Appellant product was taken by the respondents but returned within one week without testing on the ground that the issue was being finalised by the Assistant Collector. In the appeal preferred to the collector, the Appellant again raised the issue specifically that the process followed by and the product of the Appellant were identical with that of M/s. Chandulal K.P. Patel and Company and that the Appellant product should be similarly classified under Heading 24.01. While upholding the decision of the Assistant Collector, the Collector did not consider this aspect of the matter at all. The point was again taken specifically in the Appellant Appeal before the Customs, Excise and Gold (Control) Appellate Tribunal. The Tribunal however dismissed the appeal and said: The Appellant have stated that some of the manufacturers who were producing similar goods, were not paying any excise duty on their production. These matters are not before us and it is neither possible nor desirable for us to deal with these matters. Suffice it to say that each and every case has to be examined in the light of our above observations, and it is for the competent Central Excise Officers to come to correct decisions in consonance with the principles of uniformity, equity and justice.

4. It is difficult to understand the reasoning of the Tribunal. The least that the Tribunal could have done in the interest of uniformity was to call upon the Revenue Authorities to explain why they were making a distinction between the Appellant product and that of M/s. Chandulal K. Patel without subjecting the Appellant product to any chemical analysis.

5. In their Appeal from the decision of the Tribunal before us the Appellant have again raised the issue that the Tribunal should have considered the fact that the Appellant and Chandulal K. Patel & Cos products were identical and were the outcome of an identical process, and that since the latter had been exempted from paying any central excise duty on the ground that their product was classifiable under Tariff Heading 24.04, the Appellant should get the same benefit.

6. At the hearing today we sought an explanation from the learned Counsel appearing on behalf of the Revenue Authorities as to why different stand had been taken in the cases of M/s. Chandulal K. Patel & Company and the Appellant. Since the matter had not been squarely dealt with on facts at any stage by any of the authorities below, it was not possible for learned Counsel to give us the reasons for drawing this distinction between the two manufacturers and differently classify what were alleged to be materially the same product.

7. In the circumstances we deem it appropriate to set aside the order of the Tribunal and remand the matter back to the Tribunal for considering whether the product and process followed by M/s. Chandulal K. Patel & Co. is the same as that of the Appellant product for the chemical analysis if not already done. The Tribunal will thereafter consider the question of classification of the appellant product having regard to the classification of Karta Chhap Zardathe chemical analysis report and any other material that may be placed before it by the respective parties.

18. In this view of the matter, when the Commissioner in regard to the Appellant own case for a subsequent period held that Service Tax cannot be levied under the category of BAS, which order of the Commissioner attained finality, the Department cannot be permitted to contend in this Appeal that Service Tax under the category of BAS can be levied upon the Appellant.

19. It also needs to be noted that the Commissioner placed reliance upon the decision of Madhya Pradesh High Court in Smart Chip and also upon the Circular dated 18 December 2006. In Smart Chip, a contract was entered into by Smart Chip and the State Government of Madhya Pradesh for carrying out various activities which were found to be covered under the category of BAS by the Department. The Tribunal found that the activity carried out by the assessee pertains to preparation of smart cards at the service centres in different offices of the Transport Department, which would not amount to any of the category of services provided for under BAS. The Madhya Pradesh High Court found that the services rendered by the assessee for the Transport Department pertains to discharge of statutory function by the Department under the Motor Vehicles Act and the same would not amount to customer care, promotion, marketing of services, incidental or auxiliary to support services and therefore, the order of the Tribunal was upheld. The Special Leave Petition filed by the Department was dismissed on 6 July, 2015 by the Supreme Court.

20. At this stage, it will also be appropriate to refer to the order passed by the Tribunal in Virgo, where the Appellant assigned the rights and obligations by agreement dated 30 May, 2006. Virgo was paid Rs. 60/- per card by the Appellant for assisting the Appellant in the issuance of smart cards. The Revenue entertained a view that Virgo rendered a taxable service under the category of BAS in terms of section 65(19) of the Act. Accordingly, demand proceedings were initiated, but the Commissioner dropped the proceedings. The Department filed an Appeal before the Tribunal, which Appeal was dismissed and the observations are as under:

5. The above findings are contested by Revenue. The main objection is that in an arrangement between two private parties there is no question of discharging sovereign or statutory function. We note that this plea is misdirected and misconceived. Admittedly, the respondent is very much involved in execution of the project of smart card for vehicle registration. Though they are not executing the full project for Government of Maharashtra in terms of direct agreement with the Regional Transport Authorities, it is clearly an admitted fact that their work is directly linked to the preparation of smart cards which are essential to fulfill the statutory work of Government of Maharashtra. We find that the analysis of factual and legal position by the Original Authority cannot be faulted. We also examined the proposal made by the Revenue in the demand notice for tax liability of the respondent. We note that essentially the respondent were put to tax liability under sub-clause (vi) of Section 65(19) dealing with Business Auxiliary Service. The said sub-clause states provision of service on behalf of the client. We are not very clear as to who is the client and who is the recipient of service in the present case. The allegation is that M/s. Shonkh is a service provider to GOM who is a client; M/s. Shonkh are providing services to the applicants of smart card on behalf of Government of Maharashtra. Following the similar reasoning the allegation is that the respondent is providing service to M/s. Rosmerta who is a client of the respondent and the respondent are providing services to M/s. Shonkh and GOM on behalf of their client namely M/s. Rosmerta. We find that the whole assertion of revenue is contrived without any appreciation of the facts involved in the case. Admittedly, the smart card for vehicle registration is issued by Government of Maharashtra. The applicant for such smart card cannot be considered as a client to be covered under BAS tax entry. The registration of vehicle is a statutory obligation and non-compliance will attract penal consequences. GOM is implementing such statutory provision. The fee for issuing such card is fixed in terms of motor vehicle regulations and as noted by the Original Authority on payment of such fee only the process of preparation of smart card can be initiated.

The fact that the Government has outsourced some part of the work and paid certain consideration for such outsourced work does not take away the merit that the whole process of issue of smart card for applicant is statutory function which only the Government Road Transport Authority can do. We find no scope for application of clause (vi) of Section 65(19) in the scheme of things, as discussed above, there is no provision of service on behalf of the client in the present case. (emphasis supplied)

21. It has been stated by the learned Counsel for the Appellant that the said order of the Tribunal has attained finality in as much as no Appeal was filed by the Department to assail this order. The Department cannot be permitted to take a contrary stand in his Appeal.
22. Thus, for all the reasons stated above, no Service Tax under the category of BAS could have been levied upon the Appellant.”

3.3 Thus, it can be seen from the above that the demand of service tax was dropped on the ground that the services were provided to the government. The appellant have further submitted that the above decision of the tribunal has been affirmed recently by honourable Supreme Court as reported in 2023-VIL-69-SC-ST. Therefore, in view of the above it was possible for the Appellant to hold that on the activity carried out by them service tax was not payable on such activity since the services were provided to central government for discharge of sovereign function.

3.4 The next issue for our consideration is whether the demand of service tax is required to be set aside on the ground of limitation. It is undisputed fact in the present matter that the entire issue has arisen on the basis of comparison of the income disclosed by the appellant in their financial statements and disclosed the value of taxable services in their periodical returns. It is also undisputed fact that the entire income was recorded as a income in the financial statements of the appellant. Therefore it is not a case where the income was also not recorded in financial statement and the revenue authorities found out the rendition of services on the part of the appellant basis on some other sources.

3.5 We find that the similar issue was recently examined by the division bench of this tribunal at Delhi in case of M/s. Digital Infusion Pvt. Ltd. reported in 2023-VIL-894-CESTAT-DEL-ST wherein it was observed as under:

“12. It is not in dispute that the entire demand that has been confirmed by the Commissioner (Appeals) falls in the extended period of limitation. It has, therefore, to be seen whether the extended period of limitation could have been invoked in the facts and circumstances of the case.

13. To consider the issue, it would be appropriate to examine the allegations contained in the show cause notice. It mentions that non payment of service tax on the inputs service came to the notice of the department during the verification of the records and since the assessee is working under a self assessment regime the onus is on the assessee to assess the tax payable but it failed to discharge this onus. The appellant, therefore, suppressed facts with wilful intent to evade payment of service tax. The relevant portion of the show cause notice that seeks to invoke the extended period of limitation is as reproduced:-

“9. It appears that the assessee was engaged in provision of taxable services. The non-payment of service tax on the mentioned services came to the notice only during the course of verification of records of the assessee by the officers, which would have otherwise gone unnoticed. The assessee is working under the selfassessment regime, hence, the onus of assessment of tax payable is on the assessee. They have failed to discharge this onus with willful intent to evade the payment of Service Tax. Further, it also appears that the assessee had intentionally and suppressed/concealed the facts of non-payment of Service Tax on import of Services under RCM and also failed to show their liability in ST-3 return with a willful intent to evade the payment of service tax and/or availment and utilization of Cenvat Credit. But for the audit conducted, the facts of improper availment and utilization of Cenvat credit/non-payment of Service Tax would not have come to the knowledge of the department. Thus, by not disclosing the entire vital facts to the department by them, it appears that the provisions of proviso to Section 73 (1) of the Finance Act, 1994 read with Rule 14 of CENVAT Credit Rules, 2004 are invokable and so the demand and recovery can be made for short/non-payment of service tax/nonreversal of the amount under Rule 6 of the CCR for extended period of five years from the relevant date”.

(emphasis supplied)

14. The Adjudicating Authority, in the order dated 10.12.2020, held that the extended period of limitation was correctly invoked. The Adjudication Authority merely reproduced the allegations contained in the show cause notice and the relevant portion of the order is as follows:-

“9. It appears that the assessee was engaged in provision of taxable services. The non-payment of service tax on the mentioned services came to the notice only during the course of verification of records of the assessee by the officers, which would have otherwise gone unnoticed. The assessee is working under the selfassessment regime, hence, the onus of assessment of tax payable is on the assessee. They have failed to discharge this onus with willful intent to evade the payment of Service Tax. Further, it also appears that the assessee had intentionally and suppressed/concealed the facts of non-payment of Service Tax on import of Services under RCM and also failed to show their liability in ST-3 return with a willful intent to evade the payment of service tax and/or availment and utilization of Cenvat Credit. But for the audit conducted, the facts of improper availment and utilization of Cenvat credit/non-payment of Service Tax would not have come to the knowledge of the department. Thus, by not disclosing the entire vital facts to the department by them, it appears that the provisions of proviso to Section 73 (1) of the Finance Act, 1994 read with Rule 14 of CENVAT Credit Rules, 2004 are invokable and so the demand and recovery can be made for short/nonpayment of service tax/non-reversal of the amount under Rule 6 of the CCR for extended period of five years from the relevant date”.

(emphasis supplied)

15. The Commissioner (Appeals), while examining this issue, observed that it was evident that the appellant had not declared the service tax liability on import of services on reverse charge basis in the ST-3 returns, which would amount to suppression of facts and if the verification of the record had not been carried out, non-payment of service tax under the reverse charge basis would have gone undetected. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below:-

“11. I however find that in the era of self-assessment, the onus is also on the Appellant to reflect the complete and correct liability in their ST-3 return. Merely filing of returns in time any paying duty as declared, does not mean that all tax liabilities have been correctly discharged. In this context, the findings of AA in para 23.3 are relevant in this case:

“Had the department not investigated, the said taxable value would have been escaped assessment and might have resulted in non-payment of service tax”.

The findings of the AA are that the non-payment of service tax under Reverse Charge Mechanism (RCM) first came to the notice of the Department only duringm the verification of financial records conducted by the officers of Central Excise and CGST, Audit – I Commissionerate, Delhi. The Appellant failed to reflect their liability under RCM in their ST-3 returns filed by them. This is also confirmed by the Appellant in their written submission at para 3.2 that they did not reflect import of services separately under a claim of bonafide belief. It is evident that the Appellant did not declare their liability on import of services under RCM in their ST-3 returns which amounts to suppression of such import of services by the Appellant. If verification of their record was not conducted, the nonpayment of service tax under RCM could not have detected. Thus the AA has correctly invoked proviso to Section 73 (1) of Finance Act, 1994 for extended period of limitation”.

(emphasis supplied)

16. It is not in dispute that the verification was carried out by the department of the records of the appellant and on 11.04.2017 the department was aware of the fact that the appellant had not discharged the service tax liability on the input services on reverse charge basis. The department also conducted an audit of the records of the appellant on 26.07.2019 and it is not the case of the department, and it cannot be, that the department came to know that the appellant had not discharged service tax liability on the input service on reverse charge basis only during the audit. Yet, the show cause notice was issued on 23.06.2020 i.e. almost after a period of three years and two months from the date the verification was conducted by the department.

17. The appellant may have suppressed information in the ST-3 returns filed by it regarding the liability to pay service tax on input service on reverse charge basis, though it had paid service tax while providing output service, but the department was aware of this fact on 11.04.2017. All that has been stated by Commissioner (Appeals) in the impugned order is that since it was evident that the appellant had not declared the liability on import of services under reverse charge in the ST-3 returns, this would amount to suppression of such import of services and if the verification of the records had not been conducted, non-payment of service tax could not have been detected.

18. There is no finding by the Commissioner (Appeals) that this fact had been suppressed by the appellant with an intent to evade payment of service tax. Suppression of a fact is not enough to invoke the extended period of limitation, for there has also to be an intent to evade of payment of service tax. Though the Commissioner (Appeals) has referred to the verification carried out on 11.04.2017, but the Commissioner (Appeals) completely failed to appreciate that if this was the position, then the department could have issued the show cause notice promptly soon after 11.04.2017 and there was no necessity at all to wait till 23.06.2020 to issue the show cause notice. It also transpires from the order passed by the Commissioner (Appeals) that a usual reason has been stated for invoking the extended period of limitation by merely mentioning that had the department not conducted the verification, non-payment of service tax would have gone undetected and that in the era of selfassessment, it is the duty of the appellant to state the correct facts.

19. The contention of the learned counsel for the appellant is that the necessary ingredients for invoking the larger period of limitation contemplated under the proviso to section 73 (1) of the Finance Act, namely wilful suppression of facts with an intent to evade payment of service tax do not exist and, therefore, the extended period of limitation could not have been invoked. Learned counsel submitted that the appellant actually believed that since it was discharging service tax liability on the output service, it was not required to pay service tax on the input service on reverse charge basis and in any case there can be no wilful suppression with intent to evade payment of service tax as the appellant would have taken credit of the tax paid on input service while providing the output service.

20. In order to appreciate this contention it would be appropriate to reproduce section 73 of the Finance Act as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows;

“73.(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “one year”, the words “five years” had been substituted.”

21. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice.

22. The “relevant date‟ has been defined in section 73 (6) of the Finance Act as follows;

73(6) For the purpose of this section, “relevant date” means,-

(i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid-

(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;

(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;

(c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;

23. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word “one year”, the word “five years” has been substituted.

24. It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be “wilful‟ since “wilful‟ precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression “wilful” before “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. The Supreme Court and the Delhi High Court have held that suppression of facts has to be “wilful‟ and there should also be an intent to evade payment of service tax.

25. Before adverting to the decisions of the Supreme Court and the Delhi High Court, it would be useful to reproduce the proviso to section 11A of Central Excise Act, 1944, as it stood when the Supreme Court explained “suppression of facts” in Pushpam bPharmaceutical Co. vs. Commissioner of Central Excise, Bombay [1995 (78) E.L.T. 401 (SC)] – 1995-VIL-05-SC-CE. It is as follows:

“11A: Where any duty of excise has not been levied or paid or has been short-levied or short-pain or erroneously refunded, by the reason of-

(a) fraud; or

(b) collusion; or

(c) any wilful misstatement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Act of the rules made thereunder with intent to evade payment of duty

by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant dated, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice.”

26. In Pushpam Pharmaceuticals Company, the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since “suppression of facts‟ has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows;

“4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

(emphasise supplied)

27. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [2005 (188) E.L.T. 149 (SC)] – 2005-VIL-32-SC-CE and the observations are as follows:

“26……. This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression “suppression of facts” in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :-

“In taxation, it (“suppression of facts”) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act.”

(emphasis supplied)

28. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme Court in the subsequent decision in Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur [2013 (288) E.L.T. 161 (SC)] – 2013-VIL-09-SC-CU and the observation are:

“18. We are in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944.”

29. The Supreme Courtin Continental Foundation Joint Venture Holding Commissioner of Central Excise, Chandigarh-I [2007 (216) E.L.T. 177 (SC)] – 2007-VIL-40-SC-CE also held:

“10. The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.”

(emphasis supplied)

30. The Delhi High Court in Bharat Hotels Limited Commissioner of Central Excise (Adjudication) [2018 (12) GSTL 368 (Del.)] – 2017-VIL-667-DEL-ST also examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Finance Act and held as follows;

“27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word “suppression‟ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. “fraud, collusion, wilful misstatement”. As explained in Uniworth (supra), “misstatement or suppression of facts” does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty.

xxxx

Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention.”

xxxx

The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief.”

(emphasis supplied)

31. Very recently the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others [W.P. (C) 7542 of 2018 decided on 06.04.2023] – 2023-VIL-216-DEL-ST, also observed as follows:

“28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable.

xxxxxxxxx

41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL‟s contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return.”

(emphasis supplied)

32. It would transpire from the aforesaid decisions that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of duty. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax return would not mean that there was an intent to evade payment of service tax.

33. This issue was also examined at length by this Bench in M/s G.D. Goenka Private Limited versus The Commissioner of Central Goods and Service Tax, Delhi South [Service Tax Appeal No. 51787 of 2022 dated 21.08.2023] – 2023-VIL-798-CESTAT-DEL-ST and after referring to the provisions of section 73 of the Finance Act, the Bench observed:-

“13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked.

xxxxxxxxxxxxx

14. In this appeal, the case of the Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and is before us that it is entitled to the CENVAT credit. Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a selfassessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts.

16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under selfassessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under selfassessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect selfassessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment.”

(emphasis supplied)

34. In the present case, as noticed above, the Commissioner (Appeals) did not even record a finding that the appellant had any intention to evade payment of service tax since all that has been recorded in the impugned order by the Commissioner (Appeals) is that the appellant did not disclose the correct facts in the service tax returns. In the absence of such a finding, which is absolutely necessary, the extended period of limitation could not have been invoked. It is also relevant to mention that there could not have been any intent to evade payment of service tax on input service since it was open to the appellant to take credit while providing output service. The Tribunal in D. Goenka had clearly held that self assessment cannot be a ground to invoke the extended period of limitation in the absence of the ingredients contemplated under the proviso to section 73 (1) of the Finance Act. The entire demand confirmed by the Commissioner (Appeals) falls in the extended period of limitation.

35. The impugned order dated 25.08.2021 passed by the Commissioner (Appeals), therefore, deserves to be set aside and is set aside. The appeal is, accordingly, allowed.

3.6 We also find that the issue of limitation was elaborately discussed by the division bench of this tribunal at Delhi in another case of M/s. GD Goenka Private Ltd. reported in 2023-VIL-798-CESTAT-DEL-ST where in it is observed as under:

11. We have examined these grounds for invoking extended period of limitation.

12. Section 73 provides for recovery of service tax not levied, not paid, short levied, short paid or erroneously refunded. The provisions of this section apply mutatis mutandis to irregularly availed CENVAT credit recoverable under Rule 14 of CCR. This section permits invoking extended period of limitation to raise a demand on the following grounds:

a) Fraud; or

b) Collusion; or

c) Wilful misstatement; or

d) Suppression of facts; or

e) Violation of the Act or Rules with an intent to evade payment.

13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea, they cannot be invoked. Suppression of facts has also been held through a series of judicial pronouncements to mean not mere omission but an act of suppression with an intent. In other words, without an intent being established, extended period of limitation cannot be invoked. In Pushpam pharmaceuticals company vs Collector of Central Excise Mumbai [1995 (78) E.L.T. 401 (S.C.)] – 1995-VIL-05-SC-CE, the Supreme Court examined Section 11A of the Central Excise Act, 1944 which was worded similar to Section 73 of the Finance Act, 1994 and held as follows:

” 4. Section 11A empowers the Department to reopen proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

14. In this appeal, the case of the Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and is before us that it is entitled to the CENVAT credit. Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts.

15. Another reason given in the SCN for invoking extended period of limitation was that the appellant had deposited the disputed amount of service tax during audit but later disputed it which shows the appellant’s intent to wilfully and deliberately suppress the facts. This reasoning of the Revenue cannot be accepted because there is nothing in the law which requires the assessee to accept the views of the audit or of the Revenue. There is nothing in the law by which an inference of intent to evade can be drawn if the assessee does not agree with the audit. It also does not matter if the assessee deposited the disputed amount as service tax during audit and later disputed it. Often, during audit or investigation, the assessee deposits some or all of the disputed amounts and later, on consideration or after seeking legal opinion, disputes the liability and seeks a notice or an adjudication order. This does not prove any intent to evade or deliberate or wilful suppression of facts.

16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment.

17. The argument that the appellant had not disclosed in its returns that it was availing and using ineligible CENVAT credit also deserves to be rejected. The appellant cannot be faulted for not disclosing anything which it is not required to disclose. Form ST-3 in which the appellant is required to file the returns does not require details of the invoices or inputs or input services on which it availed CENVAT credit and the appellant is not required to and hence did not provide the details of the CENVAT Credit taken. It also needs to be pointed out that the Returns are filed online and therefore, it is also not possible to provide any details which are not part of the returns. If the format of ST-3 Returns is deficient in design and does not seek the details which the assessing officers may require to scrutinise them, the appellant cannot be faulted because as an assessee, the appellant neither makes the Rules nor designs the format of the Returns. So long as the assessee files the returns in the formats honestly as per its self assessment, its obligation is discharged.

18. Another ground for invoking extended period of limitation is that the appellant had not sought any clarification from the department. We find that there is neither any provision in the law nor any obligation on the assessee to seek any clarification. It was held by the High Court of Delhi in paragraph 32 of Mahanagar Telephone Nigam Ltd. vs. Union of India & Ors. [2023-TIOL-407-DELHI HIGH COURT] – 2023-VIL-216-DEL-ST as follows:

” 32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious.”

Therefore, there is no force in this ground also.

19. It has also been pointed out that but for the audit, the allegedly irregularly availed CENVAT credit would not have come to light. It is incorrect to say that but for the audit, the alleged irregular availment of CENVAT credit would not have come to light. It is undisputed that the appellant has been self-assessing service tax and filing ST-3 Returns. Unlike the officers, the assessee is not an expert in taxation and can only be expected to pay service tax and file returns as per its understanding of the law. The remedy against any potential wrong assessment of service tax by the assessee is the scrutiny of the Return and best judgment assessment by the Central Excise Officer under section 72. This section reads as follows:

“72. Best judgment assessment. If any person, liable to pay service tax,-

(a) fails to furnish the return under section 70;

(b) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.”

20. Thus, ‘the central excise officer’ has an obligation to make his best judgment if either the assessee fails to furnish the return or, having filed the return, fails to assess tax in accordance with the Act and Rules. To determine if the assessee had failed to correctly assess the service tax, the central excise officer has to scrutinize the returns. Thus, although all assessees self-assess tax, the responsibility of taking action if they do not assess and pay the tax correctly squarely rests on the central excise officer, i.e., the officer with whom the Returns are filed. For this purpose, the officer may require the assessee to produce accounts, documents and other evidence he may deem necessary. Thus, in the scheme of the Finance Act, 1994, the officer has been given wide powers to call for information and has been entrusted the responsibility of making the correct assessment as per his best judgment. If the officer fails to scrutinise the returns and make the best judgment assessment and some tax escapes assessment which is discovered after the normal period of limitation is over, the responsibility for such loss of Revenue rests squarely on the shoulders of the officer. It is incorrect to say that had the audit not been conducted, the allegedly ineligible CENVAT credit would not have come to light. It would have come to light if the central excise officer had discharged his responsibility under section 72.

21. This legal position that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs [CBEC] in its Manual for Scrutiny of Service Tax Returns the relevant portion of which is as follows:

1.2.1A The importance of scrutiny of returns was also highlighted by Dr. Kelkar in his report on Indirect Taxation [Report of the Task Force on Indirect Taxation 2002, Central Board of Excise and Service Tax, Government of India]. The observation made in the context of Central Excise but also found to be relevant to Service Tax is reproduced below:

It is the view that assessment should be the primary function of the Central Excise Officers. Selfassessment on the part of the taxpayer is only a facility and cannot and must not be treated as a dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty payment. No doubt, audit and anti-evasion have their roles to play, but assessment or confirmation of assessment should remain the primary responsibility of the Central Excise Officers.

(emphasis supplied)

22. Therefore, to say that had the audit not been conducted, the incorrect availment of CENVAT credit would not have come to light is neither legally correct nor is it consistent with the CBEC’s own instructions to its officers.

23. For the sake of completeness, it needs to be pointed out that the aforesaid Manual provides for two levels of scrutinypreliminary scrutiny of all Returns and Detailed Scrutiny of some Returns selected based on some criteria laid down in it. Relevant extracts of the manual are as follows:

1.2A Service Tax administration has had the benefit of building on the experience of Central Excise administration which is an older tax going back to 1870. More recently, in July 2000, under the CIDA-assisted capacity building project, a detailed business process reengineering exercise was initiated. For the first time, key business processes were identified and small working groups set up to examine each business process and suggest qualitative improvements to enhance revenue efficiency and ensure taxpayer satisfaction. The business re-engineering exercise conducted for returns’ scrutiny revealed the need to distinguish between preliminary scrutiny and detailed scrutiny in a two-tier scrutiny process.

1.2B It was decided that a preliminary scrutiny would be conducted on all returns. This could even be undertaken online. Detailed scrutiny, on the other hand, would cover select returns, identified on the basis of risk parameters, drawn from the information furnished by taxpayers in the statutory returns (Service Tax returns or ST-3 in this case). CBEC felt that facilitating preliminary scrutiny online would enhance efficiency and release manpower for detailed manual scrutiny, which could then become the core function of the Range/Group.

2) A detailed scrutiny programme also serves a ‘workload development’ function by initiating referrals for audit/anti-evasion.

1.2.2 Authority and Ownership

1.2.2A The authority to conduct scrutiny of returns for verifying the assessment done by the assessee is provided in Rule 5A of the Service Tax Rules, 1994. This rule, interalia, authorizes the Commissioner to empower any officer to carry out ‘Scrutiny, verification and checks, as may be necessary to safeguard the interest of revenue’. The Rule also allows the officer to call for any record maintained by the assessee for accounting of transactions, the trial balance or its equivalent, and the Income Tax Audit Report maintained under Section 44AB of the Income Tax Act. In other words, the Rule permits the officer to examine financial records for scrutinizing the return to determine the correctness of the assessments made. In pursuance of this, the Board has also issued guidelines vide letter F.No.137/27/2007 CX.4, dated 08.02.2007, which makes it mandatory to scrutinize returns on a regular basis. Details of the Board’s guidelines on returns’ scrutiny are discussed in Chapter 2 of this Manual.

1.2.2B The guidelines clearly envisaged that returns’ scrutiny would become the core function of the Service Tax Group/Range, supervised by the Assistant Commissioner of the Service Tax Unit.

24. Thus, the CBEC took a conscious decision that detailed scrutiny of the Returns should be done only in some cases selected based on some criteria. In those Returns, where detailed scrutiny is not done by the officers some tax may escape assessment which may not be discovered within the normal period of limitation. As a matter of policy, the CBEC, took such risk and the loss of Revenue is a result of the policy.

25. To sum up:

a) The appellant assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else.

b) It is the responsibility of the Central Excise Officer with whom the Returns are filed to scrutinise them and if necessary, make the best judgment assessment under section 72 and issue an SCN under Section 73 within the time limit. If the officer does not do so, and any tax escapes assessment, the responsibility for it rests on the officer.

c) Although the Central Excise Officer is empowered to scrutinise all the Returns call for records and if necessary, make the best judgment assessment, if, as per the instructions of CBIC, the officer does not conduct a detailed scrutiny of same Returns and as a result is unable to discover any short payment of tax within the period of limitation, neither the assessee nor the officer is responsible for such loss of revenue. Such a loss of Revenue is the risk taken by the Board as a matter of policy.

d) Extended period of limitation cannot be invoked unless there is evidence of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of Act or Rules with an intent.

e) Intentional and wilful suppression of facts cannot be presumed because (a) the appellant was operating under self-assessment or (b) because the appellant did not agree with the audit and claimed that CENVAT credit was admissible; or (c) because the appellant did not seek any clarification from the Revenue; or (d) because the officer did not conduct a detailed scrutiny of the Returns and the availment of CENVAT credit which is alleged to be inadmissible and was discovered only during audit.

26. We, therefore, find in favour of the appellant on the question of limitation. As the entire demand except what has been conceded by the appellant falls beyond the value period of limitation it is not necessary to examine the merits of the case.

27. For the above reasons, the impugned order is set aside except to the extent of denial of CENVAT credit or Rs. 1,45,724 on the architectural services during the period 2011-12 and interest thereon and order of its recovery. The appeal is, accordingly, partly allowed.

3.7 It is also useful to refer to one more decision of these tribunal in case of Emaar MGF Land Ltd. reported in 2021-VIL-364-CESTAT-DEL-ST wherein on ground of limitation it was held as under:

14. The first issue that arises for consideration is whether the Commissioner was justified in holding that the extended period of limitation contemplated under section 73(1) of the Finance Act, 1994 [the Finance Act] was correctly invoked in the facts and circumstances of the case.

15. The contention of the learned counsel for the appellant is that the necessary ingredients for invoking the larger period of limitation contemplated under the proviso to section 73 (1) of the Finance Act, namely wilful suppression of facts with an intent to evade payment of service tax do not exist and, therefore, the extended period of limitation could not have been invoked.

16. In order to appreciate this contention it would appropriate to reproduce section 73 of the Finance Act as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows;

“73.(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax,

by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “one year”, the words “five years” had been substituted.”

17. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice.

18. The ‘relevant date’ has been defined in section 73 (6) of the Finance Act as follows;

73(6) For the purpose of this section, “relevant date” means,-

(i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid-

(ii) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;

(iii) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;

(iv) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;

19. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word “one year”, the word “five years” has been substituted.

20. Learned counsel for the appellant submitted that the payment of service tax by the appellant on works contract services and availment of CENVAT credit was duly reflected by the appellant in the ST-3 returns and once such necessary details were reflected in the statutory returns, it cannot be urged that the appellant had suppressed facts. Even otherwise, learned counsel submitted, that suppression has to be wilful with an intent to evade payment of service tax, if the extended period of limitation has to be invoked by the Department, but the Commissioner observed that it would be possible to invoke the extended period of limitation even in a situation where there is no intent to evade payment of service tax.

21. Learned Authorised Representatives appearing for the Department have, however, supported the finding recorded by the Commissioner in the impugned order that the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act was correctly invoked. Learned Authorized Representatives also submitted that even if it is held that the extended period of limitation could not be invoked, then too, the demand could have been confirmed under 73A of the Finance Act as there is no limitation provided under the said section.

22. The Commissioner has not observed that the ST-3 returns filed by the appellant did not reflect the payment of service tax by the appellant on works contract services and availment of CENVAT credit thereon, nor any submission has been made on behalf of the respondent which may persuade the Bench to hold that the appellant had suppressed facts by the Department. Thus, the appellant had not suppressed facts from the Department.

23. There is also substance in the contention advanced on behalf of the appellant that mere suppression of fact is not enough as it has also to be conclusively established that suppression was wilful with an intent to evade payment of service tax. The Commissioner in paragraph 8.6 of the order (which has been reproduced in paragraph 8 of this order) took a view that “it is possible to invoke extended period in the case of service tax even in a situation where there is no intent to evade payment of service tax.”

24. It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be “wilful‟ since “wilful‟ precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression “wilful” before “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. The Supreme Court and the Delhi High Court have held that suppression of facts has to be “wilful‟ and there should also be an intent to evade payment of service tax.

25. Before adverting to the decisions of the Supreme Court and the Delhi High Court, it would be useful to reproduce the proviso to section 11A of Central Excise Act, 1944, as it stood when the Supreme Court explained “suppression of facts” in Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay [1995 (78) E.L.T. 401 (SC) – 1995-VIL-05-SC-CE]. It is as follows:

“11A: Where any duty of excise has not been levied or paid or has been short-levied or short-pain or erroneously refunded, by the reason of-

(a) fraud; or

(b) collusion; or

(c) any wilful misstatement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Act of the rules made thereunder with intent to evade payment of duty

by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant dated, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice.”

26. In Pushpam Pharmaceuticals Company, the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since “suppression of facts‟ has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows;

“4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

(emphasise supplied)

27. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [2005 (188) E.L.T. 149 (SC) – 2005-VIL-32-SC-CE] and the observations are as follows:

“26…….. This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression “suppression of facts” in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held:-

“In taxation, it (“suppression of facts”) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462 – 1995-VIL-05-SC-CE], we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act.”

(emphasis supplied)

28. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme Court in the subsequent decision in Uniworth Textile Limited Commissioner of Central Excise, Raipur [2013 (288) E.L.T. 161 (SC) – 2013-VIL-09-SC-CU] and the observation are:

“18. We are in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944.”

29. The Supreme Court in Continental Foundation Joint Venture Holding Commissioner of Central Excise, Chandigarh-I [2007 (216) E.L.T. 177 (SC) – 2007-VIL-40-SC-CE] also held:

“10. The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.”

(emphasis supplied)

30. The Delhi High Court in Bharat Hotels Limited Commissioner of Central Excise (Adjudication) [2018 (12) GSTL 368 (Del.) – 2017-VIL-667-DEL-ST] also examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Finance Act and held as follows;

“27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word “suppression‟ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. “fraud, collusion, wilful misstatement”. As explained in Uniworth (supra), “misstatement or suppression of facts” does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty.

xxxx

Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention.” xxxx

The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief.”

(emphasis supplied)

31. It would also be useful to refer to a decision of the Tribunal in Shiv-Vani Oil & Gas Exploration Services Ltd. C. S. T., New Delhi [2017 (47) STR 200 (Tri-Del.) – 2016-VIL-769-CESTAT-DEL-ST], wherein the Tribunal after making reference to the decision of the Supreme Court in Cosmic Dye Chemical vs. CCE, Bombay [1995 (75) E.L.T. 721 (SC) – 1994-VIL-19-SC-CE], observed that there should be an intent to evade payment of service tax if the extended period of limitation has to be invoked. The observations are as follows:

“8. Regarding the demand for extended period, we find the reason given by the Original Authority is not legally sustainable. In fact he recorded that in terms of proviso to Section 73 of Finance Act, 1994, the intention to evade payment of duty is not required to invoke extended period or to impose penalty. We find that for invoking extended period as well as for imposing penalty under Section 78, the legal provisions are identical. The words used like fraud, collusion, willful mis­statement, suppression of fact or contravention of any provisions of Chapter V of Finance Act, 1994 or of the Rules made thereunder with intent to evade the payment of Service Tax, will show that the ingredient of mala fide is a pre­requisite to invoke both the legal provisions (proviso to Section 73 and Section 78). The Original Authority recorded that it may be true that the assessee has not contravened any provisions with intend to evade payment of service tax, however, he proceeded to confirm the demand for extended period and to impose penalty of an equal amount under Section 78. We find that Hon’ble Supreme Court in Cosmic Dye Chemical v. CCE, Bombay reported in 1995 (75) E.L.T. 721 (S.C.) – 1994-VIL-19-SC-CE held as below:-

Now so far as fraud and collusion are concerned, it is evident “6. that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word “wilful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful.”

32. The Commissioner, therefore, fell in error in observing that the appellant had suppressed information from the Department regarding payment of service tax by the appellant on works contract service and availment of CENVA T credit and then holding that mere suppression of facts was enough for invoking the extended period of limitation. As noticed above, even suppression of facts has to be wilful and in any case, suppression has also to be with an intent to evade payment of service tax. Though, the Commissioner in the last sentence of paragraph 8.6 of the order observed that “in any case, the noticee, in this case, has willfully contravened the provisions of the Finance Act”, but there is no discussion or reasons given by the Commissioner for so concluding and only a bald statement has been made and that too as an alternative finding.

33. Thus, for all the reasons stated above, it is not possible to sustain the finding recorded by the Commissioner that the Department was justified in invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act.

34. The submission advanced by the learned Authorised Representatives by the Department that even if it were to be held that the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not be invoked, then too the demand can be confirmed under section 73A of the Finance Act now needs to be examined.”

3.8 We also note that the above decision of the tribunal is affirmed by Hon’ble Delhi High Court as reported in 2023-VIL-109-DEL-ST wherein the revenue department’s appeal was dismissed with following observations:

10. The impugned order is premised on two grounds. First, that the proceedings under Section 73 of the Act could not be initiated as it was beyond the period of limitation as stipulated in that section. The learned Tribunal had noted that the questions whether the respondent was required to deposit the entire amount collected as service tax with the authorities in cash in terms of Section 73A of the Act, did not arise, as the Commissioner had dropped the proceedings under Section 73A of the Act and had confined the demand under Section 73(1) of the Act for recovery of the Cenvat Credit, which according to the Commissioner had been wrongfully availed.

11. It is apparent that if the Revenue’s contention that services rendered by the respondent were not chargeable to service tax at the material time is accepted; the respondent had no liability to deposit any service tax with the authorities. Consequently, Section 73 of the Act would not apply. Section 73 of the Act is applicable only in cases where any service tax had not been levied or paid or had been short paid or erroneously refunded. Prima facie, if an assessee is not liable to pay any tax, no demand can be made for wrongful availment of input tax credit for discharge of a non-existent liability to pay tax

12. However, if a person collects any amount representing it as service tax, which is otherwise not to be collected, he is obliged to deposit that amount – in terms of Section 73A(2) of the Act – to the Credit of the Central Government. This amount is required to be credited to the Consumer Welfare Fund referred to in Section 12C of the Central Excise Act, 1944. The amount so deposited cannot be considered as deposit of tax; it is the deposit of an amount, which although collected as service tax, is not service tax.

13. It is important to note that in the present case, the learned Commissioner had dropped the demand of ₹2,44,48,095/- under Section 73A of the Act. As noted above, the Revenue had not filed any appeal against the order-in-original and had accepted the said order. Thus, no demand can now be raised on the ground that the respondent had not deposited the entire amount collected from its customers as service tax, under Section 73A(2) of the Act. If the Revenue’s contention is accepted that the services rendered by the appellant were not chargeable to tax at the material time, the Revenue may have been justified in demanding that any amount recovered from purchasers as service tax be deposited to the credit of the Central Government under Section 73A(2) of the Act. However, as stated above, that question does not arise as the Revenue had accepted the order, dropping the proceedings under Section 73A of the Act.

14. The learned Tribunal rightly found that the proposal and the show cause notice to recover a sum of ₹2,44,48,095/- under Section 73A of the Act and the interest thereon under Section 73B of the Act, was not confirmed by the learned Commissioner in his order-in-original. Accordingly, the learned Tribunal held that, in the absence of a cross-appeal by the Department, it would not be possible to confirm any demand under Section 73A of the Act.

15. We find no infirmity with the aforesaid view and thus, Question Nos. (V) and (VI), as projected by the Revenue and as noted in paragraph no. 8 above, are answered in the negative.

16. As observed above, prima facie, the question whether the respondent has wrongfully availed the Cenvat Credit would arise only if the respondent had a liability to pay service tax and had wrongfully reduced the same by claiming the Cenvat Credit. However, the said question does not arise for consideration in the present appeal. Whereas the learned Commissioner has held that the Cenvat Credit had been erroneously claimed and was liable to be recovered under Section 73(1) of the Act, the learned Tribunal had confined its examination to the jurisdiction of the Commissioner to make any such demand under Section 73(1) of the Act as being barred by limitation.

17. According to the Revenue, the extended period of limitation as provided under Section 73 of the Act was available in this case as the respondent had not filed the correct return. It is the Revenue’s case that under the scheme of self-assessment of service tax, in terms of the provisions of Section 70 of the Act, the assessee is required to assess its own tax and furnish the correct details. Since the respondent in this case had not correctly disclosed that services rendered by it were not taxable, the extended period of limitation of five years would be available notwithstanding that the respondent had no intention to evade any tax.

18. Before proceeding further, it would be relevant to refer to Section 73(1) of the Act. The same is set out below:

“SECTION 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. –

(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of –

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax,

by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “thirty months”, the words “five years” had been substituted.

Explanation.- Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of thirty months or five years, as the case may be.”

19. It is apparent from the above that the proviso to Section 73(1) of the Act is applicable only where it is found that the service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud; collusion; wilful mis­statement; or suppression of facts; or contravention of the provisions of the Act and the Rules made thereunder with the intention to evade payment of service tax. In the present case, there is no allegation of any fraud or collusion. It is also apparent from the order-in-original that the Commissioner had proceeded on the basis that the proviso would be applicable notwithstanding that there was no intent on the part of the respondent to evade any tax. The Commissioner had proceeded on the basis that the extended period of limitation was applicable on account of suppression of facts and “wilful mis-statements”.

20. In the circumstances, the Tribunal had examined the question whether the proviso to Section 73(1) of the Act was applicable on account of any wilful mis-statement or suppression of facts. According to the respondent, the services rendered by it were covered under the taxable service of ‘Works Contract’ Services. It had, accordingly, filed its return disclosing that its services were covered under Section 65(105)(zzzza) of the Act.

21. Clearly, there was no suppression as to the activities being carried out by the respondent. It is also relevant to note that the respondent’s contention that its services were covered under the ‘Works Contract’ Services is not insubstantial. In cases where another interpretation is plausible and an assessee proceeds to file a return on that basis, it would not be apposite to conclude that the assessee has made any mis-statement or suppressed any fact merely because the Revenue interprets the statutory provision differently. This is notwithstanding that the Revenue may finally prevail in its interpretation of the statutory provisions and the assessee may not. Mis-statement and suppression of facts must necessarily be examined from the perspective of sufficient disclosure or statements of facts and not contentious interpretations of statutory provisions. Once an assessee has truly disclosed the facts, it would not be apposite to invoke the provisions of Section 73(1) of the Act only on the ground that the assessee has classified its services under a head which the revenue considers erroneous. However, if such classification is, ex facie, untenable and done with the intent of evading any liability, the provisio to section 73(1) of the Act, would be applicable. If the assessee’s interpretation of the statutory provision is a reasonable one and the assessee has disclosed material facts, it would be erroneous to apply the proviso to Section 73(1) of the Act on account of mis-declaration or suppression of facts.

22. The learned Tribunal had found that there was no suppression of facts in the present case. The learned Tribunal also faulted the order-in-original inasmuch as the Commissioner had held that it was possible to invoke the extended period even where the assessee had no intent to evade payment of service tax.

23. In Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay: 1995 Supp (3) SCC 462 – 1995-VIL-05-SC-CE, the Supreme Court had interpreted the proviso to Section 11A of the Central Excise Act, 1944, which was similarly worded as the proviso to Section 73(1) of the Act, and observed as under:

“4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been  used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.”

(emphasis added)

24. The aforesaid decision was followed by the Supreme Court in its later decision in Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut: 2005 (7) SCC 749 – 2005-VIL-32-SC-CE. The learned Tribunal had, inter alia, referred to the aforesaid decisions as well as the decision of the Co-ordinate Bench of this Court in Bharat Hotels Limited v. Commissioner of Central Excise (Adjudication): 2018 (12) GSTL 368 (Del.) – 2017-VIL-667-DEL-ST and had concluded that the proviso to Section 73(1) of the Act would be applicable on account of mis-statement or suppression of facts only if the same was deliberate and for the purposes of evading payment of duty.

25. In Bharat Hotels Limited v. Commissioner of Central Excise (Adjudication) (supra), the Co-ordinate Bench of this Court observed as under:

“26. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word “suppression” in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. “fraud, collusion, wilful misstatement”. As explained in Uniworth (supra), “misstatement or suppression of facts” does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty.

xxxx

Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention.”

xxxx

The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief.”

(emphasis added)

26. In Continental Foundation Joint Venture Holding, Nathpa H.P. v. Commissioner of Central Excise, Chandigarh: 2007 (216) E.L.T. 177 (SC) – 2007-VIL-40-SC-CE, the Supreme Court held as under:

“12. The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.”

27. In view of the authoritative decisions rendered by the Supreme Court, the learned Tribunal held that the Commissioner had erred in holding that the respondent had suppressed information from the Department regarding payment of service tax.

28. We concur with the finding of the learned Tribunal that in the given facts, the proviso to Section 73(1) of the Act could not be applied. The respondent had filed its return of service tax on the basis that its services were taxable as ‘Works Contract’ Services. It had availed the Cenvat Credit to the extent of ₹2,44,48,095/- and had paid the balance amount in cash in discharge of the liability, which was computed on the aforesaid basis. There is no allegation that the respondent had concealed that it was carrying on the activity of construction and selling residential flats.”

3.9 We also note that the entire issue has arisen on the basis of income recorded by the appellant in their financial statements. We refer to the decision of this tribunal in case of Swarn Cars Pvt. Ltd. reported in 2019-VIL-1520-CESTAT-ALH-ST wherein it is observed as under:

“3. On perusal of above reproduced part of said show cause notice it is very clear that the allegation is to the effect that appellant had suppressed value and such suppression was allegedly as compared to the entries in the balance sheet. This Tribunal has repeatedly held that if the information is available in the balance sheet which is a public document then allegations of suppression cannot sustain. We note that the appellant had filed ST-3 Return and the allegation is on the basis of information available in the public document i.e. balance sheet. Therefore, we hold that suppression is not established. We, therefore, hold that the extended period was not available to the Revenue. We, therefore, hold that the impugned order is not sustainable. We set aside the same and allow the appeal.”

3.10 We observe that Learned Commissioner has dealt with the submission of the appellant on the ground of limitation in paragraph 16.13 of the impugned Order in Original dated 19.05.2023. Para 16.13 of the impugned order in original dated 19.05.2023 is reproduced below:

“16.13 The Noticee submitted that the period of limitation is inapplicable as the Books of Accounts is a public document and that non-disclosure of information which was not required to be disclosed or recorded by statutory provision or prescribed proforma does not amount to suppression or concealment and accordingly larger period of limitation cannot be invoked. In this regard, the extension period has been rightly invoked in the SCN, as the Noticee had not disclosed the value/ amount received towards resurfacing of runway received in respect of said contract dated 14.06.2016 in their respective ST-3 returns. Even though the said amount was considered as exempted by the Noticee, the same is required to be mentioned in the ST-3 return along with the provisions/ specific applicable exemption Notification. As the said amount was not mentioned in the ST-3 return, the difference in the same as compared to that mentioned in the Books of Accounts/ Form 26AS was revealed during the investigation leading to demand SCN. The case laws cited upon by the Noticee fail in supporting this contention of the Noticee.”

3.11 It can be seen from the above that Ld. Commissioner has only observed that since the appellant did not disclose the revenue for these project in their periodical return and therefore the Ld. Commissioner has justified the invocation of extended period of limitation to confirm the demand of service tax in the present matter. Learned Commissioner has not given any ground to show that there was a deliberate attempt on the part of the appellant to suppress or to miss declare the value of service. Ld. Commissioner has not even examined the various ingredients for invocation of extended period of limitation as provided in first proviso to section 73(1) of the Finance Act 1994.We observe that on the basis of the above analysis of Section 73(1) of the Finance Act, 1994 and various decision of these tribunal and settled principle of law we are of the clear view that the demand of service tax in the present matter beyond the period of limitation is not sustainable. We observe that the demand in the present matter is for the period 2016-17 and April 2017 to June 2017 and the show cause notice is issued on 27.08.2020. Therefore the entire demand is liable to be set aside on the ground of limitation as discussed above.

4. In view of our above discussion and finding the impugned order is set aside and appeal filed by the Appellant is allowed with consequential relief, if any.

(Pronounced in the open court on 02.11.2023)