Extended period of Limitation

PJ/Case Laws/2011-12/1303

Extended period of Limitation - Invocation of

Case: RAJASTHAN STATE WAREHOUSING CORP. v/s COMMR. OF C. EX., JAIPUR

Citation: 2011 (23) S.T.R. 385 (Tri- Chennai.)

Issue:- Extended period cannot be invoked when the point is not raised in previous audit and PSU asseessee has started paying service tax henceforth.

Brief Facts:- Appellant is a public sector undertaking engaged in the business of warehousing fertilizer and other items. They were registered with Service Tax Authorities for payment of tax on “storage and warehousing” charges. During examination of records of Appellant during audit conducted by service tax authorities, it was observed that the appellant were recovering supervising charges from their customers. These charges were being collected by them from their customers at a certain percentage of handling and transportation charges for which they were raising bills to their customers. They were paying such handling and transportation charges to the handling and transportation contractors appointed by them.

Department alleged that the service provided by appellant of Handling and Transportation with supervision would fall under “Cargo Handling Service”. As soon as the issue was pointed out to them, appellant started paying tax on such services.

Afterwards, Show Cause Notice was issued to the appellant demanding tax on “Cargo Handling Service” rendered during the past, invoking the extended period of time specified in Section 73 of Finance Act, 1994.

The Adjudicating Authority confirmed the demand of service tax with interest and also imposed penalties under Sections 76 and 78 of the Finance Act, 1994.

Now, the matter is before the Tribunal.

Appellant’s Contention:- Appellant contended that they could never understand that they were a “cargo handling agency” because they are in the business of warehousing of goods for which they were already paying service tax. This was a service provided by the contractors and the charges were recovered from the customers who use such services. But as a corporation owned by the State Government they did not want to enter into dispute on this issue with the Union of India and as soon as the issue was pointed out to them they have started paying tax for the charges collected by them and paid to their contractor who was providing the service. In this proceeding they were not contesting the merits of the issue. Their only contest was that they had no intention of evading any tax. Since there was no intention to evade tax, the demand invoking extended period of time is not maintainable.

Reasoning of Judgment:- The Tribunal held that the fact that audit by the department on previous occasions did not point out this issue though they were collecting charges during such period. They were satisfied that the appellant did not have any intention to evade impugned tax. Therefore the demand will be sustainable only to the extent of demand covered by normal period of time of one year. Interest under Section 75 is to be paid on the sustainable portion of demand. Penalty under Section 76 will be maintainable in respect of period within normal period. Penalty under Section 78 will not be maintainable.

Decision:- Appeal disposed off.

Comment:- This is very important point that the extended period cannot be invoked when all the transactions are recorded in the books and audit is being conducted by the department from time to time. Normally, the department invokes extended period when audit para is raised. They do not see that the point was not raised in previous audit although the transactions were recorded in Balance sheet. But there is change in definitions now. The penal provision is proposed when pointed out by audit even though the transactions are recorded in books of account. These new provisions have come from this budget only. Let us see the interpretation of the same in times to come.

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PJ/Case Laws/2011-12/1303

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