Extended Limitation Can't Be Invoked If No 'Omission' & Suppression Of Material Facts' To Evade Tax : Calcutta HC

The High Court clarified that if the State seeking to recover tax, cannot bring the subject within the letter of law, then it goes without saying that the subject is free.

The Division Bench of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya observed that “Coal cutting or mineral extraction and lifting them up to the pithead: These activities are essential integral processes and are part of mining operations. As stated earlier, mining activity has been made taxable by legislation under the Finance Act, 2007(w.e.f.1.06.2007). Prior to this date, such activities, being part of mining operations itself are not subjected to service tax. Therefore, no service tax is leviable on such activities prior to the said date.”

Facts of the case:

The assessee was a mining contractor involved in the mining operation as defined under the Mines and Minerals (Development and Regulation) Act, 1957 for extraction of minerals within the mining area. Upon the bonafide relief that service tax in respect of mining activities was levied for the first time with effect from 1st June, 2007, the assessee did not apply for registration before the 1st June, 2007. Further the Department invoked the provision of extended period of limitation and created an artificial bifurcation in the nature of services of the assessee under various categories, such as, cargo handling service, site formation and clearance service and business auxiliary services and therefore imposed service tax in respect of services rendered prior to 1st June, 2007.

On appeal, the Tribunal faulted the Department for creating an artificial bifurcation of the mining activity done by the assessee while noting that no such separate charges are payable to such service as per the work orders. That apart, the Tribunal also took note of the Circular FL No. 232/2/2006, wherein it was clarified that no service is leviable on mining activity prior to 1st June, 2007.

Observations of the High Court:

The Bench noted that except for the use of the words “omission and failure”, “suppression of material facts”, “with an intent to evade payment of service tax”, the adjudicating authority has not brought out any facts to substantiate as to how there was an act of omission and failure on the part of the assessee to disclose the correct facts and that it was with an intent to evade payment of service tax.

In the absence of these essential elements, it is a settled legal position that the extended period of limitation cannot be invoked, added the Bench.

Further, the Bench noted that the assessee has been paying service tax and there is no regard for the chargeability of the service tax prior to 1st June, 2007 that too, by artificially bifurcating the composite services rendered by the assessee, the extended period of limitation cannot be invoked.

As all the details were reflected in their books of account and balance-sheet and also where all the facts and figures have been explicitly brought on record, the question of suppression of facts would not arise, added the Bench.

The Bench reiterated the decision of the Supreme Court in the case of Union of India vs. Indian National Shipowners Association [(2011) 11 STR 3 (SC)], wherein it was held that “in regard to the period relevant in the said case was from 01.06.2007 to 15.05.2008 and that the amendment was brought in subsequently but yet, by taking recourse to Section 65(105) entry No. zzzy, the members of the association are still liable to pay service tax”.

Therefore, the High Court dismissed the appeal of the revenue.

Counsel for Appellant/ Revenue: K.K. Maity, and Tapan Bhanja

Counsel for Respondent/ Assessee: Satyaprem Majumder

Case Title: Commissioner Of Service Tax verses G.S. Atwal & Co. Engineering Pvt Ltd.

Case Number: CEXA/11/2024

Citation : 2024 LiveLaw (Cal) 176

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