Whether service tax, interest and penalties can be imposed if the demand is barred by limitation?

PJ/Case Law /2016-17/3376

Case-MARVA TREADS Versus COMMISSIONER OF CENTRAL EXCISE, VISAKHAPATNAM

Citation-2016 (45) S.T.R. 181 (Tri. - Hyd.)
Brief Facts-The appellants are engaged in providing the services of re-treading of old tyres which fall under the category of ‘maintenance & repair services’. Though the appellant took registration in 2007, they did not discharge their service tax liability or file ST-3 returns. A show cause notice dated 14-10-2010 raising a demand of Rs. 8,55,389/- for the period from 1-4-2007 to 31-3-2010 was issued. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Being aggrieved the appellant filed appeal. The Commissioner (Appeals) vide the impugned order upheld the same. Hence the present appeal.

Appellant’s Contention-None appeared for appellant. The appellant has filed a request to decide the case on merits as per the grounds stated in the appeal. The foremost contention raised in the appeal is that the demand is barred by limitation. According to appellants, the Department issued summons to the appellant to furnish details on 2-8-2008 and statement of Shri A. Viswanathan, the person-in-charge of appellant company was recorded on 15-9-2008. That though Department had full knowledge on these dates the show cause notice was issued after much lapse of more than 2 years.
Respondent’s Contention-Countering these, the learned AR Ms. N. Soumya strongly argued that the appellant had not disclosed all details and therefore, the Department did not have the required details to determine the service tax which was due from the appellant. That therefore, the notice issued is legal and proper. To canvass her argument, she stressed on the discussion made in the impugned order which is as under :-
7. … … The appellant’s contention that the Department has got knowledge of the facts on 15-9-2008 when the statement of Shri A. Viswanathan, Manager of the appellants has been recorded and show cause notice was issued later on 14-10-2010 after a lapse of 2 years 1 month is devoid of any substance. Since no such details were made available to the Department, the Superintendent wrote a letter asking to submit the details. The appellants vide their letter dated 28-11-2009 have furnished the details viz. service charges collected and tax paid for the period from October, 2008 to March 2009. Further the appellants vide their letter dated 25-6-2010 furnished the details of processing charges collected during the year 2009-10. Further, the appellants vide their letter dated 10-7-2010 addressed to the Superintendent of Service Tax, Kakinada submitted their income tax returns along with Profit & Loss Account and balance sheets for the financial years 2007-08 and 2008-09……..

Reasoning Of Judgement-The Tribunal heard the rival submissions. The show cause notice is dated 14-10-2010. It is seen stated in Paras 5 and 6 of the show cause notice that in response to the summons dated 2-9-2008, the appellants furnished details. Based on the details furnished by the appellant, the Department arrived at the amount of Rs. 8,85,389/- as service tax due from the appellant. In the show cause notice, it is not stated that there was delay on the part of appellant in furnishing the details necessary for computation. There is no whisper in the show cause notice that due to delay caused on the part of appellant, it was not possible to collect details. In any case, after issuance of summons on 2-9-2008, the statement of Mr. Viswanathan was recorded on 15-9-2008. Therefore, it can be said that Department had acquired knowledge at least on 15-9-2008. The show cause notice issued beyond the period of one year from the date of acquiring knowledge is time-barred. As there is no allegation in the show cause notice that appellant caused delay in furnishing information or did not co-operate with the investigation/inquiry, the findings of the Commissioner (Appeals) that the details furnished was insufficient to compute liability is based on mere assumptions. It is proved that Department acquired knowledge on 15-9-2008. In view thereof, the Tribunal held that the demand is time-barred and therefore, unsustainable. The appeal is allowed with consequential reliefs.
(Operative part of this order was pronounced in Court on conclusion of the hearing)

Decision-Appeal allowed.
Comment-The gist of the case is that the assessee was engaged in services of re-treading of old tyres. Though the appellant took registration in 2007, they did not discharge their service tax liability or file ST-3 returns. Subsequently, the Department issued summon to the assessee. Although, in response to summons, the assessee appeared before authorities and tendered statement on 15-9-2008 with requisite details, the Department issued SCN on 14.10.10. There were no allegations in show cause notice that appellant did not submit details or submit insufficient details or did not co-operate with investigations/inquiry. Since, the said notice was issued on 14-10-2010 which is much beyond period of one year from date of acquiring knowledge by Department and hence time barred by limitation. Accordingly, the impugned order was set aside as per Section 73 of Finance Act, 1994.

Prepared By- Praniti Lalwani

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PJ/Case Law /2016-17/3376

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