Whether extended period invokable even if company is regularly filing balance sheets with Registrar of Companies?

PJ/Case Law/2014-15/2142

Case:- M/s NOBLE DETECTIVE AND SECURITY SERVICE PVT LTD Vs COMMISSIONER OF SERVICE TAX, AHMEDABAD

Citation:- 2014-TIOL-385-CESTAT-AHM

Brief facts:- The appeal was filed by the appellant against OIA No.60/2009(STC)/LMR/Commr(A)/Ahd dt 27.2.2009/5.3.2009. Facts of the case were that appellant was engaged in providing services of Security Agency and held a Service Tax Registration. During a scrutiny of the records maintained by the appellant for the period 2002-03 to 2004-05, it was found that there was a difference in the amounts reflected in the profit and loss account of the appellant and the ST-3 returns filed with the revenue. Show cause notice for the period 2002 to March 2005 was issued to the appellant on 26/9/2007 which was decided by Jt Commissioner, S.T., Ahmedabad under OIO No.STC/87/Joint Commr/08 dt 20/2/08 confirming demand of Rs.14,87,288/- alongwith interest. Penalties were also imposed under Sec. 76 and 78 of the Customs Act 1994. An appeal against the said OIO dt 20/2/2008 was filed before the First Appellate Authority which was rejected by Commissioner (A) under OIA dt 27.2.2009/5.3.09 against which the present appeal had been filed by the appellant.

Appellant’s contentions:- Shri R R Dave (Adv.) appeared on behalf of the appellant and argued that they were contesting the appeal only on the ground of time bar and not on merits. It was his case that as appellant was a private company and their balance sheets were public documents, copies of which were regularly filed with Registrar of Companies under the Companies Act, therefore, extended period could not be made applicable. It was also argued by the Ld. Advocate that there were two show cause notices issued on the same issue and in both the show cause notices extended period was invoked. It was his case that the fact of difference in profit and Loss value and the ST-3 returns value was known to the Revenue and therefore, extended period could not be invoked in the present show cause notice in view of the M/s Nizam Sugar Factory vs CCE, AP case [2008 (9) STR 314 (S.C.) = (2006- TIOL-56-SC-CX) & CCE, Ahmedabad III vs M/s Akshar Chem (I) Ltd., [2013 (292) ELT 550 (Tri. - Ahmd)].

Respondent’s contentions:- Shri J Nair (AR) appearing on behalf of the Revenue argued that in view of CESTAT Bangalore's Order in the case of CCE, Calicut vs M/s Steel Industries [2005 (188) ELT (33) (Tri.-Bang.)] theory of universal knowledge, in case of balance sheet filed with Registrar of Companies under the Companies Act, would not make the demand time barred. Regarding invoking of extended period in the second show cause notice, he relied upon the judgment of Madras CESTAT in the case of M/s Robot Detective & Security Agency vs CCE, Chennai = (2009-TIOL-238-CESTAT-MAD).

Reasoning of judgment:- Heard both sides and perused the case records. The case was agitated by the appellant only on the issue that demand in the present proceedings was time barred. First argument taken by the appellant was that their balance sheets were public documents as being filed with the Registrar of Companies under Companies Act and extended period would not be applicable it was observed from the judgment of Bangalore Bench in the case of CCE, Calicut vs. Steel Industries Kerala Ltd (Supra) that this issue was no more res integra. In Para 3 of this decision, after relying upon the case law of M/s Maruti Udyog Ltd vs CCE, New Delhi [2001 (134) ELT 269], the following was held:
"We find that in the case of Maruti Udyog Ltd. v. CCE, New Delhi, 2001 (134) E.L.T. 269, the Tribunal has upheld the invocation of the extended period of limitation when the assessees did not declare waste and scrap of iron and steel and aluminium and availment of credit thereon either in their classification list or modvat declaration or in the statutory records. The Tribunal held that the theory of universal knowledge cannot be attributed to the department in the absence of any declaration. In the light of this decision, we agree with the learned DR that the demand could not have been held to be barred by limitation and accordingly set aside the finding of the Commissioner (Appeals). Since no decision on merits has been recorded by the lower authority, we set aside the impugned order and remand the case for fresh decision on merits to the Commissioner (Appeals) who shall pass fresh orders after extending a reasonable opportunity to the assessees of being heard in their defence."
In view of the above position of law appellant's argument, that demand was time barred, as balance sheets were regularly filed with Registrar of Companies was required to be rejected and detailed findings of Commr (A) in Paras - 7 & 8 of his OIA dtd 27.2.09/05.03.09 were required to be upheld.
On the issue of invocation of extended period in the second show cause notice, it may be mentioned that limitation issue was a mixed question of facts and law. This appeal had to be seen from the facts of with the present case. Once on an issue a show cause notice was issued to the appellant then it was also appellant's duty to inform the Revenue that inspite of earlier show cause notice appellant continued to follow the earlier practice of declaring incorrect value of services in their ST-3 return vis-a-vis balance sheets. Revenue could not imagine that the appellant will continue to follow a wrong practice inspite of earlier show cause notice issued to them. In view of the above facts and circumstances being different, the case laws relied upon by the appellant will not be applicable to the present proceedings. These views were also fortified by the ratio of decision given by CESTAT Madras in the case of M/s Robot Detective & Security Agency CCE., Chennai = (2009-TIOL-238-CESTAT-MAD) relied upon by Learned AR to the effect that extended period can be invoked in a subsequent show cause notice.
In view of the above findings, the appeal is rejected.

Decision:- Appeal was rejected.

Comment:- The analogy drawn from the case is that the theory of universal knowledge cannot be attributed to the department in the absence of any declaration from the assessee. Hence, it cannot be contended that as the company regularly filed the balance sheets, extended period of limitation was not invokable. The reason for the same was given as revenue cannot assume that the appellant will continue to follow a wrong practice inspite of earlier show cause notice issued to them. This case also denies applicability of the decision given in the case of Nizam Sugar Factory wherein it was held that the larger period of limitation cannot be invoked in case of subsequent show cause notice as the facts were already in knowledge of the revenue department.

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PJ/Case Law/2014-15/2142

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