Limitation period to be calculated from date of knowledge by revenue authoritie

PJ/CASE LAW/2016-17/3123

CASE: -M/s SARVOTTAM EMERY STONES Vs COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAIPUR-II

Citation:-2016-TIOL-1262-CESTAT-DEL

Issue:- Limitation period to be calculated from date of knowledge by revenue authorities.

Brief facts:-The brief facts of the case were that the appellant was engaged in manufacture of flour mill and emery mill stones falling under Chapter 84 of the Central Excise Tariff Act, 1985. For procurement of raw-material and despatch of finished goods, the appellant engaged the Goods Transport Agency (GTA) service, on which in terms of Rule 2(i)(d)(v) of Service Tax Rules, 1994, the appellant was liable to pay service tax under reverse charge mechanism. The period involved in this case is from 01.01.2005 to 31.12.2007. For non-payment of service tax, the Department initiated proceedings against the appellant and in the adjudication order dated 28.03.20.11, the Addl. CCE&ST had confirmed the demand of Rs.11,44,984/-and also imposed equal amount of penalty under Section 78 of the Finance Act, 1994. Besides, penalty of Rs.5,000/- also imposed under Section 77 of the Act. In appeal, the Commissioner (Appeals) has upheld the said demand and thus, the present appeal before this Tribunal.

Appellant’s contention:-Shri OP Agarwal, ld. consultant for the appellant submitted that the service tax demand was not sustainable on merits as per the Notification No.34/2004-ST, dated 03.12.2004, since the freight of full truck load has not exceeded Rs. 1,500/-. He further submitted that in some of the cases, freight charges related to transportation of goods in a goods carriage is less than Rs.750/- and as per the said Notification, transportation of goods was exempted from whole of service tax leviable. Ld. Consultant further contended that the issue involved in this case was related to interpretation of provisions of Notification issued under Finance Act, 1994, and as such, suppression of fact with intent to evade payment of tax, cannot be levelled, justifying invocation of extended period of limitation. To support his stand that extended period cannot be invoked in the present case, ld. consultant had relied on the judgement of the Hon'ble Supreme Court in the cases of Orissa Bridge & Construction Corporation Ltd. Vs. CCE[2011 (264) ELT14 (SC) and Commissioner Vs. Gammon India Ltd. [2002 (146) ELTA-813(SC)].

Respondent’s contention:-On the other hand, ld. Departmental Representative appearing for the Revenue reiterated the findings recorded in the impugned order.

Reasoning of judgment:-The bench found from the Show Cause Notice that all the relevant documents were furnished by the appellant before the jurisdictional service tax authorities, under the cover of its letter dated 15.02.2008 and thereafter, the Show Cause Notice was issued on 26.11.2009 invoking the extended period of limitation as per the proviso to Section 73 (1) of the Finance Act, 1994. Since the activities of the appellant regarding its availing the services of GTA were known to the Department away back in February, 2008, the Show Cause Notice should have been issued within one year from the date of its knowledge. Since the proceedings have been initiated beyond the period of one year, he was of the view that the same is barred by limitation of time and the demand cannot be sustained on this ground alone.

He found that the Hon'ble Supreme Court, in the case of Orissa Bridge & Construction Corporation Ltd. Vs. CCE (supra), while dealing with the limitation aspect for issuance of Show Cause Notice have held that the Department is not justified in invoking the extended period of limitation after a gap of approximately two years from the date of inspection of the factory of the assessee. Further, on an identical issue, Hon'ble Supreme Court in the case of Commissioner Vs. Gammon India Ltd. had upheld the view of this Tribunal that Show Cause Notice issued nearly two years after the completion of enquiry, alleging suppression of facts and invoking the extended period of limitation was not sustainable. Further, by relying on the above judgements of the Hon'ble Supreme Court, this Tribunal in its Final Order No.A/1390-1392/12-SM(BR.) dated 14.09.2012 in the case of M/s. Basuki Synthetics Pvt. Ltd. Vs. CCE, Jaipur-II have also taken the view that proceedings cannot be initiated beyond the period of one year from the date of knowledge of activities of the assessee.

In view of the above settled principles of law, he was of the opinion that the impugned order was not sustainable. Therefore, the same was set aside and the appeal was allowed in favour of the appellant.

Decision:-appeal allowed

Comment:- The gist of this case is that when revenue had knowledge of activities undertaken by the assessee then show cause notice must be issued within one year of such knowledge and extended period of limitation cannot be invoked.

Prepared by:- Prayushi Jain

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PJ/CASE LAW/2016-17/3123

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