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Judgment
Service Tax Appeal No. 70075 of 2020 has been filed by M/s A.N. Kapoor (Janitors) Pvt. Ltd. the Appellant to assail the order dated December
27, 2019 passed by the Additional Director General (Adjudication), New Delhi, the Additional Director General, confirming the demand of service tax
with penalty and interest.
Service Tax Appeal No. 70076 of 2020 has been filed by Harish Kapoor, Director of the Appellant, against the imposition of penalty of Rs. 1 lac
upon him.
Service Tax Appeal No. 70077 of 2020 has been filed by Madhu Kapoor, Director of the Appellant, against the imposition of penalty of Rs. 1 lac
upon her.
The Appellant, which is a company incorporated under the Companies Act and having its office at Lucknow, registered itself with the service tax
Department under ‘cleaning activity’ service as defined under section 65(24)(b) of the Finance Act, 1994, the Finance Act , which service is
taxable under section 65(105)(zzzd) of the Finance Act. The Appellant claims that it provided ‘cleaning activity’ services to government
hospitals, educational institutes and non-commercial organizations, though a sizable portion of the revenue was generated from Sanjay Gandhi Post
Graduate Medical Institute, Lucknow, SGPGMI.
In response to the letters issued by the Department, the Appellant submitted a letter dated August 13, 2007 to the Assistant Commissioner with a
copy of the balance sheet for the financial years 2005-06 & 2006-07 and explanation for nonpayment of service tax on the consideration received by
the Appellant from non-commercial organizations like SGPGMI and Hindustan Aeronautics Limited, HAL. The Department, however, was not
satisfied with the explanation offered by the Appellant and issued a show cause notice dated October 28, 2009, first show cause notice to the
Appellant for the period November 2005 to January 2008 by invoking the extended period of limitation contemplated under the proviso to section 73(1)
of the Finance Act and requiring the Appellant to explain why service tax had not been paid by the Appellant on the amount received from SGPGMI
and HAL for the ‘cleaning activity’ services provided by the Appellant. The demand was confirmed by the order dated June 17, 2010. It is
against this order that the Appellant filed an Appeal before the Commissioner (Appeals), who by order dated March 04, 2011 dismissed the Appeal.
This order of the Commissioner (Appeals) was assailed by the Appellant before this Tribunal in service tax Appeal No. 841 of 2011.
The Department again initiated an inquiry against the Appellant for non-payment of service tax on services rendered to non-commercial
organizations and ultimately a show cause notice dated September 29, 2011, second show cause notice was issued to the Appellant demanding service
tax for the period 2006-07 to 2009-10 again by invoking the extended period of limitation. The Appellant submitted a reply that earlier also a show
cause notice dated October 28, 2009 was issued for the period November 2005 to January 2008 and, therefore, there was no suppression of facts so
as to invoke the extended period of limitation. The Authority, however, confirmed the demand by order dated December 28, 2012 and the Appeal filed
by the Appellant before the Commissioner (Appeals) to assail the said order was decided on January 29, 2014. Demands in respect of services
rendered to certain centres as also the demands included in the first show cause notice dated October 28, 2009 were dropped, but the remaining
demands were confirmed. This order dated January 29, 2014 was assailed by the Appellant before the Tribunal. The Revenue also filed an Appeal
against that part of the demand which had been dropped by the Commissioner (Appeals). These two Appeals were numbered as ST/52793 of 2014
and ST/52319 of 2014.
All the aforesaid three Appeals bearing numbers ST No. 841 of 2011, ST No. 52793 of 2014 and ST No. 52319 of 2014 were decided by the
Tribunal by a common order dated November 20, 2018. The two Appeals filed by the Appellant were allowed for the reason that the extended period
of limitation could not have been invoked, while the Appeal filed by the Revenue was dismissed. The Tribunal observed as follows :
“4. We have carefully gone through the records of the cases and submissions made. We first examine the limitation aspect in the present
appeals. We find that the Revenue was having full knowledge of the activities of the appellant as early as 13.08.2007, however, by invoking
extended period of limitation with allegation of suppression show cause notice was issued on 28.10.2009 and the said show cause notice was
issued for the period from November, 2005 to January, 2008. We, therefore, find that the said show cause notice is hit by limitation and,
therefore, not sustainable. Therefore, we set aside the impugned Order-in-Appeal dated 04.03.2011. We also find that the ruling by the
Hon’ble Supreme Court in the case of Nizam Sugar Factory (supra) is squarely applicable in respect of the show cause notice dated
29.09.2011, therefore, show cause notice dated 29.09.2011 is not sustainable. We, therefore, set aside the confirmation of demand of
Service Tax of Rs.18,65,775/- along with all penalties sustained through impugned Order-in-Appeal dated 29.01.2014 and set aside the
impugned Order-in-Appeal dated 29.01.2014 to that effect. We, therefore, allow Appeal Nos. ST/841/2011 & ST/52793/2014 both filed by
service provider. We further dismiss the appeal filed by Revenue.â€
[emphasis supplied]
It also needs to be noted that a notice dated July 05, 2016 had also been issued by the Office of the Commissioner to the Appellant for conducting
of an audit for the period 2012-13 to 2015-16. Amongst the various documents that were required to be submitted by the Appellant, the Appellant was
also required to give details of the exempted services, if availed by it. The Appellant claims that it had submitted all the relevant documents. The audit
was conducted on October 05, 2016. The report did not find any issue in the payment of service tax or availment of exemption by the Appellant and it
was only suggested that there was late payment of service tax on occasions, for which interest was demanded. The audit report was ultimately
approved by the Deputy Commissioner (Audit).
On April 24, 2018, the Department again conducted an audit for the subsequent period i.e Financial Year 2016-17 and for the period April to June,
2017. According to the Appellant, all the relevant documents were again submitted and the Appellant also informed that in the periodical ST-3 returns
filed since July 01, 2012, exemptions had been claimed and the relevant exemption notification was also mentioned in the returns and that the
jurisdictional Assistant Commissioner did not raise any objections. However, the Officers of the Directorate General of Central Excise Intelligence
(DGCEI), the Directorate visited the premises of the Appellant and initiated an inquiry from April 01, 2012.
This inquiry resulted in issuance of a third show cause notice dated November 13, 2019 for the period April 01, 2014 upto June 30, 2017 by also
invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act. It was stated that the Appellant had
wrongly claimed exemption in respect of certain services which had resulted in short payment of service tax. In regard to the extended period of
limitation, it was stated that the Appellant had suppressed the facts and value of taxable service and contravened various provisions of the Act and
Rules with an intent to evade payment of service tax and thus, appeared to have rendered itself liable for penal action under section 78 of the Finance
Act. Shri Harish Kapoor and Smt. Madhu Kapoor, Directors of the Appellant, were also required to show cause as to why personal penalty should not
be imposed upon them under section 78A of the Finance Act.
The Appellant filed a reply dated December 12, 2019 contending that the extended period of limitation could not have been invoked and the
relevant portion of the reply submitted by the Appellant is as follows :
“24. Defence reply:
xxxxx xxxxx xxxxx
xxxxx xxxxx xxxxx
xxxxx xxxxx xxxxx
A. That the department has issued the Show Cause Notice to the Noticee third time by invoking extended period of limitation. Before this department
had issued Show Cause Notice No. 83/ADC/LKO/2009 dated 28.10.2008 & 67/ADC/LKO/ST/2011 dated 29.09.2011 by invoking extended period of
limitation on same issue and both the demands were set aside by the Hon’ble CESTAT. Therefore invocation of extended period for the third time
on the same issue (taxability of Cleaning Services rendered to the government organization) is unwarranted.
B. That from the impugned Show Cause Notice it appears that the Noticee had wrongly availed the benefit of Serial No. 9 of Notification No.
25/2012-ST dated 20.06.2012 in their periodical ST-3 returns during the disputed period, therefore, the issue relates to taxability of interpretation of
exemption notification.
C. That the department had conducted audit in the year 2017 for the period April, 2012 to March 2016 and no such discrepancy were noticed by the
department.â€
Before the Additional Director Genenral, the Appellant pressed the issue of limitation and did not make any submission on the merits of the case.
The Additional Director Genenral, however, did not accept the contention advanced by the Appellant on the question of limitation and the relevant
portion of the order is reproduced below :
“29.1 I find that no doubt the Noticee has not put any submissions on the merits of the case, but they have raised the issue of limitation on
the demands made in the show cause notice in their reply dated 12.12.2019. Under Para A of their reply they have contended that the
department has raised the SCN to the Noticee third time by invoking the extended period of limitation. They have submitted that the
department had raised SCN No. 82/ADC/LKO/2009 dated 28.10.2009 and 67/ADC/LKO/ST/2011 dated 29.09.2011 by invoking the
extended period of limitation on the same issue and both the demands were set aside by the Hon’ble CESTAT. Therefore invocation of
extended period for the third time on the same issue (taxability of cleaning Services rendered to the Government organization) is
unwarranted.
29.2 In this context, firstly I find that no such show cause notice of the CESTAT orders have been submitted by the Noticee for consideration.
Further as held by me above, the short paid service tax amount is not due to question regarding the question of taxability of the cleaning
services but mainly due to the fact that such service tax was charged and collected by the Noticee but shown as exempted services by the
Noticee in their records. Secondly, the Noticee has also wrongly claimed the benefit of Exemption Notification No. 25/2012-S.T. dated
20.6.2012 and as amended in some cases. I find that the provisions of the Exemption Notification are quite clear and even a plain reading
of the Notification clearly shows the services that are exempted and those that are not covered under the said Notification. Further, looking
to the said fact that no document was made available by the Noticee to the Investigating Officers either at the time of Audit or during
investigations by the officers of the DGGI and that the said details of the services being provided by the Noticee were collected by the
officers from the service recipients clearly proves that the Noticee wanted to suppress the information from the department and thus the
extended period under the proviso clause of Section 73(1) has been rightly invoked in the present SCN.
29.3 The next contention of the Noticee is regarding the fact that they had wrongly availed the benefit of Serial No. 9 of Notification No.
25/2012-ST dated 20.6.2012 in their periodical ST-3 returns during the disputed period, therefore, the issue relates to taxability and
interpretation of exemption Notification. I find that I have already discussed this contention of the Noticee in the previous para, wherein I
have held that provisions of the exemption Notification are quite clear and leave no doubt about inclusion or non-inclusion of any service.
Further, it is also a fact that the Noticee had collected the service tax from most of the service recipients, showing in their records as
exempted services. Moreover, the Noticee did not cooperate with the audit and the investigating agency and did not provide documents
relating to provision of service forcing the investigating agency to carry out investigation at the end of service recipients. This clearly shows
that the case of the Noticee was not merely of interpretation of exemption notification but involved suppression of facts and figures with
intent to evade payment of service tax. The Noticee had also collected service tax and failed to deposit the same with the Government
exchequer. In view of the foregoing discussion I find that the contention of the Noticee is not sustainable.
29.4 The next contention of the Noticee is regarding conducting of the audit of the records of the Noticee from April 2012 to March 2016,
wherein no such discrepancy was noticed. In this context I find that no such record has been produced before me in this regard by the
Noticee.
29.4.1 Secondly, I find that in many cases, the Hon’ble CESTAT and Courts have held that the visit of Audit parties cannot be cited as a
ground for resisting the applicability of larger period of Limitation. There is no documentary evidence that these documents were placed
before the Central Excise Audit officers and there is no further evidence that these documents were examined by the Audit party from the
view of liability to Service Tax. Under the circumstances, I hold that mere visit by Audit party of the Department to the Noticee’s office
or mere examination of other records for other purposes cannot lead to the conclusion that there was no suppression of facts on the part of
the Noticee……..
29.4.2 In my view, even if the Audit party visits a unit, unless there is evidence that the relevant documents were produced before the Audit
Party and there exists a report by the Audit Party on those documents, the Assessee shall have the liberty to claim that there was no
suppression and accordingly in those circumstances the provisions of Larger period of Limitation can very well be invoked. Looking to the
present case, I find that no evidence has been submitted by the Noticee in support of their contention that the documents examined by them
during the course of audit are subject matter of present demand notice. Under the circumstances, I hold that this judgment is applicable to
the present case.â€
[emphasis supplied]
Shri Vineet Kumar Singh and Smt. Nisha Bineesh, learned counsel for the Appellant, made the following submissions:
(i) The extended period of limitation could not have been invoked in the facts and circumstances of the case, more particularly when since August 13,
2007 all the relevant information with the balance sheets for the financial years were available with the Department, including the particulars of the
exemption and the exemption notifications which were mentioned in the periodical ST-3 returns;
(ii) The extended period of limitation could not have been invoked after successful completion of the audit as in the present case the demand was
raised by the third show cause notice dated November 13, 2019 for the period from April 01, 2014 upto June 2017, whereas the previous audit was
done on March 31, 2016; and
(iii) When the demands made in the earlier two show cause notices dated October 28, 2009 and September 29, 2011 for the period from November
2005 to January 2008 and 2006-07 to 2009-10 respectively was confirmed by the Department and was set aside by the Tribunal by order dated
November 20, 2018 for the reason that the extended period of limitation could not have been invoked, the third show cause notice dated November 13,
2019 could not have been issued by invoking the extended period of limitation for the same exempted services.
Shri Rajiv Ranjan, learned Authorized Representative of the Department, has, however, supported the impugned order and made the following
submissions :
(i) The Additional Director General committed no error in holding that the extended period of limitation had correctly been invoked;
(ii) The Appellant did not produce any records that could reveal that an audit was conducted for the period 2012-13 to 2015-16 and even otherwise the
audit report cannot be made a ground to resist the applicability of the extended period of limitation;
(iii) There is also no documentary evidence to support the fact that all the documents were examined by the audit officers before examining whether
the exemption from payment of service tax was correctly availed by the Appellant; and
(iv) The bonafide of the Appellant is also doubtful since the Appellant had been collecting service tax, but in the ST-3 returns they showed that the
payments received were for providing exempted services.
The submissions advanced by learned Counsel for the Appellant and learned Authorized Representative of the Department have been considered.
It is not in dispute that the Appellant had taken service tax registration under ‘cleaning activity’ services on November 09, 2006 and that
ever since then it has engaged itself in rendering such services. According to the Appellant, it provided both taxable and non-taxable services. The
non-taxable services are those services, which, according to the Appellant, have been exempted from payment of service tax under various
Notifications issued from time to time. The Department did raise this issue through various letters issued to the Appellant and on August 13, 2007 the
Appellant explained that the liability to pay service tax was exempted. However, the first show cause notice dated October 28, 2009 for the period
November 2005 to January 2008 was issued to the Appellant demanding service tax on the services which the Appellant claimed had been exempted
from payment of service tax. The demand was confirmed by the adjudicating authority and the Appeal filed by the Appellant before the Commissioner
(Appeals) was also dismissed. A second show cause notice dated September 29, 2011 was thereafter issued to the Appellant for the period 2006-07
to 2009-10. The demand made in the second show cause notice was also confirmed, though the Commissioner (Appeals) did reduce the demand
It needs to be noted that the extended period of limitation was sought to be invoked in the first and the second show cause notices. When the
matter came up before the Tribunal, the issue regarding invocation of the limitation period was raised by the Appellant. The Tribunal accepted this
contention and held that since the Revenue had full knowledge of the activities of the Appellant since August 13, 2007, the extended period of
limitation alleging suppression of facts could not have been invoked. The demand was, therefore, set aside for this reason alone and the two Appeals
filed by the Appellant were allowed.
According to learned Counsel, the issue raised in the third show cause notice dated November 13, 2009 for the period April 01, 2014 to June 20,
2017 is the same issue which was raised in the first two show cause notices as all the three show cause notices relate to the payment of service tax
on services which, according to the Appellant, were exempted from payment of service tax. Learned Authorized Representative of the Department
has not been able to point out any difference in the issues raised in the third show cause notice, except for the period involved. Such being the position,
when the demand made in the earlier two show cause notices dated October 28, 2009 and September 29, 2011 were set aside on the ground of
limitation as the revenue had knowledge of the activities of the Appellant from August 13, 2007, the demand raised in the third show cause notice
dated November 13, 2019 also deserves to be set aside on the ground of limitation.
In this connection, it would be pertinent to refer to the decision of the Supreme Court in Nizam Sugar Factory vs Collector of Central Excise, A.P.,
2008 (9) STR 314 (SC). The Department had issued a show cause notice dated February 28, 1984 demanding duty for the period February 1978 to
September 1982. A second show cause notice dated July 16, 1987 was again issued for the period 1982-83 to 1986-87. A plea was taken by the
Appellant, in response to the second show cause notice, that the allegations made in the second show cause notice were practically a repetition of the
allegations made in the first show cause notice and so the invocation of the extended period of limitation was not justified. A third show cause notice
dated September 12, 1988 for the period March 16, 1988 to June 27, 1988 was also issued on the same allegations. The Appellant again filed a reply
on the same lines as was filed to the second show cause notice. The adjudicating authority, however, did not accept the plea and the demands raised
in the show cause notices were confirmed. Appeals were filed before the Tribunal relating to the second and the third show cause notices. It was
contended before the Tribunal that the extended period of limitation could not have been invoked since there can be no suppression of facts when a
show cause notice had been issued by the Department on the basis of certain set of facts is followed by another show cause notice for a later period
on the same set of facts. The contention advanced was that the Department was fully aware of the facts even at the time of issuance of first show
cause notice. The Supreme Court disposed of the Appeals on the point of limitations only and the observations are as follows :
“8. Without going into the question regarding Classification and marketability and leaving the same open, we intend to dispose of the
appeals on the point of limitation only. This Court in the case of P & B Pharmaceuticals (P) Ltd. v. Collector of Central Excise reported in
(2003) 3 SCC 599 = 2003 (153) E.L.T. 14 (S.C.) has taken the view that in a case in which a show cause notice has been issued for the
earlier period on certain set of facts, then, on the same set of facts another SCN based on the same/similar set of facts invoking the extended
period of limitation on the plea of suppression of facts by the assessee cannot be issued as the facts were already in the knowledge of the
department. It was observed in para 14 as follows :
“14. We have indicated above the facts which make it clear that the question whether M/s. Pharmachem Distributors was a related
person has been the subject-matter of consideration of the Excise authorities at different stages, when the classification was filed, when the
first show cause notice was issued in 1985 and also at the stage when the second and the third show cause notices were issued in 1988. At
all these stages, the necessary material was before the authorities. They had then taken the view that M/s. Pharmachem Distributors was not
a related person. If the authorities came to the conclusion subsequently that it was a related person, the same fact could not be treated as a
suppression of fact on the part of the assessee so as to saddle with the liability of duty for the larger period by invoking proviso to Section
11A of the Act. So far as the assessee is concerned, it has all along been contending that they were not related persons, so, it cannot be said
to be guilty of not filling up the declaration in the prescribed proforma indicating related persons. The necessary facts had been brought to
the notice of the authorities at different intervals from 1985 to 1988 and further, they had dropped the proceedings accepting that M/s.
Pharmachem Distributors was not a related person. It is, therefore, futile to contend that there has been suppression of fact in regard M/s.
Pharmachem Distributors being a related person. On that score, we are unable to uphold the invoking of the proviso to Section 11A of the
Act for making the demand for the extended period.â€
This judgment was followed by this Court in the case of ECE Industries Limited v. Commissioner of Central Excise, New Delhi reported in
(2004) 13 SCC 719 = 2004 (164) E.L.T. 236 (S.C.). In para 4, it was observed :
“4. In the case of M/s. P&B Pharmaceuticals (P) Ltd. v. Collector of Central Excise reported in [2003 (2) SCALE 390], the question was
whether the extended period of limitation could be invoked where the Department has earlier issued show cause notices in respect of the
same subject-matter. It has been held that in such circumstances, it could not be said that there was any wilful suppression or mis-statement
and that therefore, the extended period under Section 11A could not be invoked.â€
Similarly, this judgment was again followed in the case of Hyderabad Polymers (P) Ltd. v. Commissioner of Central Excise, Hyderabad
reported in 2004 (166) E.L.T. 151 (S.C.). It was observed in para 6 :
“.......... On the ratio laid down in this judgment it must be held that once the earlier Show Cause Notice, on similar issue has been
dropped, it can no longer be said that there is any suppression. The extended period of limitation would thus not be available. We are
unable to accept the submission that earlier Show Cause Notice was for a subsequent period and/or it cannot be taken into consideration as
it is not known when that Show Cause Notice was dropped. If the Department wanted to take up such contentions it is for them to show that
that Show Cause Notice was not relevant and was not applicable. The Department has not brought any of those facts on record. Therefore,
the Department cannot now urge that findings of the Collector that that Show Cause Notice was on a similar issue and for an identical
amount is not correct.â€
Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in
the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken
as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. We agree with the view
taken in the aforesaid judgments and respectfully following the same, hold that there was no suppression of facts on the part of the
assessee/appellant.â€
Similar is the position in the present case. The Department was aware of the facts when the first show cause notice was issued and, therefore, the
extended period of limitation could not have been invoked in the third show cause notice.
The Additional Director General has ignored the order passed by the Tribunal on November 20, 2018 on the first and the second show cause
notices for the reason that the said notices or the order of the Tribunal had not been submitted by the Appellant. As noted above, the Appellant in
reply to the show cause notice had made a specific reference to the two show cause notices by giving the number and the dates and the order passed
by the Tribunal. Even if it is assumed that the Appellant had not placed the two show cause notices and the order passed by the Tribunal, nothing
prevented the Additional Director General from perusing the records of the Department for examining the two show cause notices and the order
passed by the Tribunal. The Additional Director General could have even asked the Appellant to produce the two show cause notices and the order
passed by the Tribunal. The important documents referred to by the Appellant that went to the root of the matter could not have been ignored in this
manner.
The Additional Director General has also noted in the impugned order that no document was made available by the Appellant to the investigating
Officers either at the time of audit or during investigations by the Officers of the Directorate and so it was a case of suppression of information by the
Appellant. This is only a bald statement as nothing has been mentioned as to what particular document was not filed. In support of the contention that
the extended period of limitation could not have been invoked, the Appellant had placed reliance upon the two show cause notices, the order passed by
the Tribunal and the earlier audit report. These were relevant factors which were required to be examined by the Additional Director General to arrive
at a conclusion as to whether the extended period of limitation could be invoked.
What also needs to be noted is that the amount charged for the exempted service that were provided by the Appellant was being repeatedly
shown by the Appellant in the ST-3 returns filed in 2014 and 2015, and it is not a case where the Appellant had suppressed any information from the
Department regarding the amount it had charged for the exempted services. It cannot, therefore, be urged that the Appellant had suppressed
information or facts from the Department.
What is further important to note is that on July 05, 2016, the Department also issued a notice to the Appellant for conducting an audit for the
period 2012-13 to 2015-16. The Appellant was required to furnish all the relevant documents, including documents relating to details of the exempted
services. The audit report does not mention that the Appellant had provided any service which was not exempted under the various Notifications and
the audit report was also approved by the Deputy Commissioner (Audit).
In regard to the audit report, the Additional Director General has even doubted whether the relevant documents were placed before the officers
conducting the audit. In case the Additional Director General had any doubts, the audit report could have been called for and examined. Even
otherwise, there is a detailed procedure for conducting an audit. It specifically requires physical verification of the documents and in the present case
the Appellant was also required to give details of the exempted services. There was really no occasion for the Additional Director General to doubt
the correctness of the audit report.
Even otherwise, as the records indicate, a letter dated July 02, 2015 was sent by the audit team requiring the Appellant to submit the necessary
documents for conducting the audit for the period April, 2012 to March, 2016 and all the documents were supplied by the Appellant. The Audit Manual
contains detailed guidelines for conducting an audit. The Additional Director General, therefore, could not have brushed aside the audit report merely
on conjectures and surmises that the relevant documents may not have been placed by the Appellant or the relevant documents were not examined by
the audit team.
The judgment of the Karnataka High Court in Commissioner of Central Excise, Bangalore-I vs MTR Foods Limited, 2012 (282) ELT 196 (Kar.)
deals with this issue of limitation in a matter when an audit report has been submitted and the observations are :
“4. As is clear from the material on record, the returns were filed promptly. In the returns it is clearly mentioned that they availed credit
under the aforesaid rules. The audit partly accepted the same. It is only in the second audit that they noticed the mistake and initiated
proceedings. Therefore, in the light of the aforesaid facts none of the other conditions prescribed in the Proviso exists in this case to extend
the period of limitation of 5 years. It is in this background the Tribunal was justified in setting aside the order passed by the appellate
authority and in restoring the order passed by the original authority. Therefore, there is no merit in this appeal. Accordingly, it is
dismissed.â€
A Division Bench of the Tribunal in Trans Engineers India Pvt. Ltd. vs Commissioner of Central Excise, Pune, 2015 (40) STR 490 (Tri.-Mumbai)
also examined whether the extended period of limitation could have been invoked when the audit report did not raise any query in respect of the
payment of the service tax as alleged in the show cause notice. The relevant portion of the decision is reproduced below :
In our view the entire demand is to be set aside on the ground on limitation only. Revenue authority cannot invoke the extended period
of limitation, when the records of the assessee were audited by the officers once but did not find any shortpayment from records. The 2nd
audit party, doing the audit of same period or over lapping period, cannot allege that appellant has misstated or suppressed the facts from
the departments. We find that the Hon’ble High Court of Bombay in the case of Rajkumar Forge Ltd. - 2010 (262) E.L.T. 155 (Bom.)
held in paragraph No. 13.
“13. It is an undisputed fact that insofar as the petitioners are concerned, audit of the petitioners’ factory was carried out on three
dates, i.e., 6th September, 1993, First November, 1995 and 2nd September, 1994. The petitioners vide their letter dated 6th September, 1993
have recorded the visit of the audit party and have also replied to the audit objections raised by the said audit party in respect of scrap
generated and have informed the authorities that they were debiting Rs. 80,000/- at the rate of Rs. 1,000/-per Metric Ton and that they were
also debiting differential duty totalling to Rs. 63,318/- in respects of Mill Rollers which was debited under PLA dated 3rd September, 1993.
Therefore, the petitioners vide their letter dated 5th July, 1995 have informed the Superintendent of the respondents that they had debited
Rs. 2,08,760/- against the Scrap Generation at sub-contractor end, where material is sent for processing under Rule 57F(3) for the period
January, 94 to March, 95. Therefore by the said letters the petitioner had made the respondents aware of the payment of duty on the scrap
as well as on the Mill Rollers and considering the fact that the respondents had carried out audit on the dates mentioned herein above, the
sad fact is conclusive insofar as the knowledge of the petitioners’ activities to the respondents is concerned. Therefore, in our view, in
the light of the audit carried out by the respondents off the petitioners’ factory and the correspondence that is addressed by the
petitioners to the respondents, it cannot be said that the petitioners have mis-stated the facts or there is a fraud practiced by the
petitioners.â€
The Additional Director General has also observed that the Appellant had collected the service tax from most of the service recipients, but had
mentioned in the ST-3 return that they were exempted services. This finding is also not based on the basis of records as nothing has been brought on
the record to indicate that the Appellant had actually collected service tax for the exempted services. Merely because the Appellant collected an
amount inclusive of taxes does not mean that service tax was included because there are many other taxes that are required to be paid.
Thus, for all the reasons stated above, it is not possible to sustain the demand of service tax raised against the Appellant as the extended period of
limitation contemplated under the 22 ST/70075/20 & ors. proviso to section 73(1) of the Finance Act could not have been invoked.
In this view of the matter, penalty could also not have been imposed upon the two Directors of the Appellant.
The impugned order dated December 27, 2019 is, accordingly, set aside and all the three Appeals bearing numbers ST/70075/2020, ST/70076/2020
and ST/70077/2020 are allowed.
(Pronounced in the open Court on February 15, 2021)