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Limitation / Time-Bar

Landmark Service Tax Judgments: Limitation

Introduction:
Unlike provisions of Central Excise, provisions of Service Tax are based more on trust on the assessee. One of such feature is self-assessment by the assessee through the filing of returns. However, the service tax department has a power to recover service tax when there is under-payment of tax. A question may arise that how to detect such short-payment or non-payment? The answer is it may be detected either on verification of returns submitted by the asseessee, on account of Audit performed by the Audit Party, or on the basis of intelligence gathered by the officer. In cases where the Assessing Officer suspects non-payment or short-payment of Service Tax, he will issue a show cause notice within the specified period.
 
Limitation Period:

In accordance with provisions of Section 73 of the Finance Act, 1994. Recovery of Service tax not levied or paid or short levied or short paid or erroneously refunded can be done by Central Excise Officer. Such officer shall issue show cause notice to the concerned person requiring him to show cause why he should not pay the amount specified in the notice. Normally time duration for issue of Show Cause Notice is 18 months from the relevant date, however it may be extended in certain cases up to 5 years. It is also termed as invoking larger period or invoking extended period for issue of show cause notice.

 
What is relevant date?
"Relevant date" under various circumstances from which the period of limitation starts for issuance of show cause notice. 
SITUATION RELEVANT DATE
Provisional Assessment Date of Final Assessment
Erroneous Refund Date of such refund
If return is filed Date of Filing such return
If return is not filed Due date of Filing such return required to be filed but is not filed
 
When Extended period / larger period can be invoked?

Where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within Five Years from the relevant date, serve notice on the person chargeable with demand of the Service Tax .

Where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-

(a) Fraud; or

(b) Collusion; or

(c) Willful mis - statement; or

(d) Suppression of facts; or

(e) Contravention of any of the provisions of this Finance Act, 1994 or of the rules made there under with intent to evade payment of Service Tax.

 
What is in it for assessee?
In most Cases Department issues Show Cause Notice invoking larger period of 5 years, with a common allegation of suppression facts. What is suppression? Suppression is basically an action with an intention to hide something from someone. Thus the ball rests finally on the term “Intention of the assessee”, which according to assessee’s claim is always bona-fide and according to department view point malafide. If we see the judicial rulings of various courts, the assessee has won plethora of cases on issue of time-bar / limitation. Over a period of time, innumerous times it has been held by all the judicial forums that larger / extended period cannot be invoked if assessee’s actions were bonafide. Thus, arguments on limitation / time-bar are important defense tools for the assessee who faces time and time again show cause notices invoking larger period.
 

 

Case Laws Related

  • STO 2013 CESTAT 643
  • Security Agency Service: Limitation: Invocation of extended period of time is also sustainable inasmuch as the appellant deliberately withheld the details of the services rendered from the department and accordingly confirmation of demand invoking the extended period of time is correct in law.

  • STO 2013 CESTAT 212
  • Suppression of facts: Registration fee: Inclusion Thereof: respondent not disclosed fact regarding collection of registration fee in the ST3 returns. It is only during the scrutiny of records it was found that the registration fee is not added to the gross value of the taxable service. Hence the allegation of suppression with intent to evade tax is also sustainable.

  • STO 2013 CESTAT 60
  • Consulting Engineering: Demand: Limitation: Adjudicating authority himself found case for fit for invoking Section 80, hence, demand for longer period not sustainable: Directions issued for partial pre deposit of demand for normal period.

  • STO 2012 CESTAT 1133
  • Limitation: BAS: Appellant's activities were known to the department and the department was confused under which category the service tax is leviable on the services received by the appellant. It was changed from BAS to Computer network services and finally to intellectual property rights service. In view of this factual position, the question of suppression of any facts by the appellant does not arise at all.

  • STO 2012 CESTAT 866
  • Demand: Limitation: Stay : Appellants were under bonafide belief that reimbursable expenses were not to be included in the taxable value as they came across Board Circular relating to Market Research & Survey: Demand for larger period not found sustainable: Directions issued for partial pre deposit in respect of demand for normal period.

  • STO 2012 CESTAT 688
  • Cenvat Credit: Services provided outside SEZ: Larger period : Even if the appellants were to pay the Service Tax, the recipient could have claimed the refund and during the period prior to 03.03.2009 and subsequent to 20.05.2009, exemption was available and apparently during the relevant period by oversight, the provisions of exemption got omitted: Larger period not invokable. 

  • STO 2012 CESTAT 674
  • Reimbursible expenses: Inclusion thereof: Demand for larger period not sustainable in view of confusion in the trade and department.

  • STO 2012 CESTAT 368
  • Demand: Limitation: question involves interpretation of law and facts in this case and therefore we consider invocation of extended period is not called for.: Soverign function performed by appellants on behalf of RBI exempted from tax.

  • STO 2012 CESTAT 479
  • Limitation: Tribunal gave benefit of bonafide belief to the appellant and has held that in the absence of any wilful misstatement suppression of facts with intent to evade payment of tax, extended period cannot be invoked

  • STO 2012 CESTAT 457
  • Limitation: Section 80 penalty waiver: once the appellate authority comes to a finding for not imposing penalty on the ground that there was no intention to evade payment of duty, the same criteria would apply for the purpose of limitation.

  • STO 2012 CESTAT 583
  • Turnkey Project: Demand issued on entire value under Works Contract Service: Stay: even if project is a turkey contract then also the value of material supplied is to be excluded from the value of the taxable services and if the same is excluded then prima facie on the remaining part of the services the service receiver has already paid service tax : Prima facie case made out for waiver.

  • STO 2012 CESTAT 393
  • Construction of Complex Service: Limitation : Stay: For the same period earlier also demand issued for the said service was dropped and order accepted by the department: Waiver from pre deposit granted.

  • STO 2012 CESTAT 259
  • Valuation: Free supplied items: Penalty: Since there were interim orders issued by the Courts in the matter, suppression of facts cannot be invoked, demand for service tax upheld, penalties set aside: Departmental appeal dismissed. 

  • STO 2012 CESTAT 367
  • Reimbursible expenses: whether without incurring the expense the service could have been provided at all is basic parameter in concluding taxability: Department itself confused before introduction of Valuation Rules, 2006: Larger period cannot be issued.

  • STO 2012 CESTAT 167
  • Rent-a-cab-scheme: Limitation: Since, the demand is not sustainable on the ground of limitation, there is no need to go into the question as to whether the appellant's activity was taxable as 'rent a cab operator's service' or not.

  • STO 2012 CESTAT 190
  • Limitation: Contrary decisions from co-ordinate benches: Extended period cannot be invoked.

  • STO 2012 CESTAT 141
  • Maintenance or Repair Service: Value of spare parts sold by the service provider on which VAT has been paid is not to be included in the taxable value.

  • STO 2012 CESTAT 83
  • Demand: Limitation: Mensrea is an essential element and is required to be established by the department, by tangible affirmative evidence. Mere failure on the part of the assessee, especially when the issue involved is of complicated interpretation of the provisions of law, which were relevantly new, cannot be equated with any malafide suppression or mis-statement.

  • STO 2012 CESTAT 288
  • Limitation: Show Cause Notice time barred as same issued much after audit conducted by the department: Stay: Directions to pre deposit issued for demand of normal period.

  • STO 2012 CESTAT 73
  • GTA Service: Demand: Stay: Limitation: The applicant specifically mentioned in the letter that as all the consignments belongs to the applicant and the charges does not exceed Rs. 1500/-, therefore, the applicants are not paying any Service Tax in respect of the GTA services: On limitation ground stay granted.

  • STO 2012 CESTAT 108
  • GTA Service: Service tax paid with interest: Although detected by Audit, it cannot be said there was suppression of facts, particularly when both the authorities below have not justified suppression of facts: Provisions of Section 73(3) were required to be invoked and no notice to be issued for penalties.

     
     

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