The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that the extended period of limitation is not applicable unless there is clear evidence of fact suppression with the intent to evade tax.
The appellant, engaged in construction services, wrongly availed CENVAT credit while also claiming abatement under a service tax notification without maintaining separate records for taxable and exempted services. The department issued a show cause notice and confirmed a tax demand with penalty and interest. The lower authorities upheld the order, leading to an appeal before CESTAT.
The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) observed, “it is evident that mere suppression of facts is not sufficient, but 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 appellant, the extended period of limitation cannot be invoked. As the extended period is held to be not invokable, hence the penalty under section 78 is also liable to be set aside.”
The Tribunal ruled that the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, cannot be invoked merely on the basis of suppression of facts unless it is shown to be *wilful* and accompanied by an *intent to evade* service tax. It agreed with the appellant's argument that the demand was based on disclosed information in the ST-3 returns. Referring to settled legal principles laid down by the Supreme Court and Delhi High Court, the Tribunal emphasized that mere suppression is not sufficient—there must be clear evidence of deliberate intent to evade tax.
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