Whether extended period invokable without referring section 78?

PJ/Case Laws/2012-13/1452

Case:- M/s AVESTHAGEN LTD Vs COMMISSIONER OF SERVICE TAX, BANGALORE

Citation: - 2013-TIOL-348-CESTAT-BANG

Brief facts: - The Application filed by the appellant seeks waiver of pre-deposit and stay of recovery in respect of the adjudged dues which include mainly the following amounts:

(i) Rs.3,36,83,803/- demanded as service tax and education cess under the head “Scientific and Technical Consultancy Service.

(ii) Rs.8,42,51,610/- demanded as service tax and education cess under the head "Intellectual Property Service".

(iii) Penalties under Sections 76 and 77 of the finance Act, 1994.

The total amount of service tax and education cess (over Rs.11.79 crores) has been demanded for the period from October 2004 to September 2009. The relevant show-cause notice was issued on 21.4.2010 invoking the proviso to Section 73 (1) of the Act on the alleged ground of suppression of facts with intention to evade payment of service tax.

Appellant’s Contention :- The learned consultant for the appellant has also vehemently raised the plea of limitation by pointing out that the adjudicating authority did not invoke Section 78 of the Act (though invoked in the show-cause notice) and, therefore, that the authority ought not to have invoked the extended period of limitation. His submission is that the grounds for a penalty under Section 78 are similar to those for invoking the extended period of limitation under the proviso to Section 73 (1) of the Act. Further submitted that a considerable part of the 'Scientific and Technical Consultancy Service' was, in fact, exported and its value should not have been reckoned for the demand of service tax. It is further submitted that the amounts collected by the appellant from M/s Cipla Ltd. were also not to be reckoned as taxable value of 'Intellectual Property Service' inasmuch as that amount represented 50% of the cost incurred for execution of research as joint venture between the appellant and M/s Cipla Ltd.

Reasoning of Judgment:- The Tribunal have not found a case for total waiver of pre-deposit inasmuch as most of the documents relied upon by the assessee before the adjudicating authority have been withheld from us. In the absence of the relevant agreements and connected documents, it has not been possible for us to evaluate the merits claimed by the appellant. Nevertheless found a valid point in the submission of the learned consultant that their plea of limitation is supported by certain findings of the adjudicating authority. It is not in dispute that, though Section 78 was invoked in the show-cause notice on apparently valid grounds, no penalty was imposed under that provision on the assessee by the adjudicating authority holding that the assessee cannot be held to have any intention to evade payment of service tax. It is not deniable that the grounds for invoking Section 78 are not different from those for invoking extended period of limitation. If that be so, there is a dichotomy in the impugned order in invoking the extended period of limitation and not invoking Section 78. Therefore the appellant has a fairly strong case on the ground of limitation. Their plea of financial hardships is also worth considering as it is supported by certain documents. An amount of Rs. 45 lakhs has, admittedly, been paid by them. In the totality of these facts and circumstances, direct the appellant to pre-deposit a further amount of Rs. 20,00,000/- (Rupees Twenty lakhs only) within six weeks and report compliance to the Assistant Registrar on 18.12.2012. The Assistant Registrar to report to the Bench on 26.12.2012. Subject to due compliance, there will be waiver and stay in respect of the penalties imposed on the appellant and the balance amount of service tax and education cess and interest thereon.

Decision: - Pre-deposit Ordered.

Comment:-The substance of this case is that partial stay was granted on the basis that there was a strong case on grounds of limitation and pleadings of financial hardship.

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PJ/Case Laws/2012-13/1452

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