No Element Of Misstatement And Intention To Evade Payment Of Service Tax: Gauhati High Court Quashes Demand & Penalty
Finding that the Assessee company had provided every detail regarding availment of CENVAT Credit in the ST-3 Returns, and the same was considered by the Central Excise Commissioner, the Gauhati High Court held that the fact of wilful misstatement or suppression should specifically be mentioned in the show-cause notice. Since the Department had not misstated any fact with intent to...
Finding that the Assessee company had provided every detail regarding availment of CENVAT Credit in the ST-3 Returns, and the same was considered by the Central Excise Commissioner, the Gauhati High Court held that the fact of wilful misstatement or suppression should specifically be mentioned in the show-cause notice.
Since the Department had not misstated any fact with intent to evade the payment of service tax, the Division Bench of Chief Justice Vijay Bishnoi and Justice Suman Shyam observed that there was no element of misstatement and contravention of Service Tax Rules with the intent to evade payment of Service Tax.
Facts of the case
The respondent/ Assessee, had provided services under the category of “Erection, Commissioning or Installation Services” to various organizations like Electricity Board etc. under the specific contract. Apart from that, the respondent also supplied materials like RCC Poles, conductors, angles etc. under separate and independent contract. According to assessee, the supply of materials was not covered under the purview of Service Tax but the Erection, Commissioning or Installation part was liable to Service Tax. The Appellant/ Department however alleged that the Assessee had violated Rule 3 and Rule 6 of the CENVAT Credit Rules, 2004 by availing and utilizing the CENVAT Credit of Central Excise Duty amounting to Rs.1,30,84,835.00 only on inputs used for rendering exempted service as defined under Rule 2(e) of the Rules, 2004.
However, based on audit objection, the Commissioner, Central Excise and Service Tax, had issued a demand-cum-show-cause notice (SCN) to the Assessee asking as to why, an amount of Rs.1,30,84,835/- wrongly utilized by it should not be demanded and recovered along with the interest. The Assessee did not contest the demand on merits but contested the show-cause notice only on the ground that it was beyond the period of limitation. Later, the Commissioner confirmed the demand of ineligible CENVAT Credit as Service Tax along with the interest and penalty. Such order of Commissioner was reversed by the CESTAT on appeal.
Observation of the High Court
The Bench accepted that the Assessee had availed ineligible CENVAT Credit which was not permissible in terms of the provisions of CENVAT Credit Rules, 2004.
Referring to Section 73 of the Service Tax (Finance Act, 1994), the Bench observed that where any service tax is not levied or paid, short-levied or short-paid or erroneously refunded, a show-cause notice is required to be served upon the person chargeable with the Service Tax within a period of 18 months from the relevant date.
However, the Bench stated that where any Service Tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act with the intent to evade payment of Service Tax, then the limitation for serving notice upon the person chargeable with the Service Tax is extended up-to 5 years from the relevant date.
Thus, since assessee had disclosed all the details about availment of the CENVAT Credit in ST -3 Returns and there is no allegation of wilful suppression & misstatement with intent to evade Service Tax in the show-cause notice, the Bench concluded that there is no illegality in the order passed by CESTAT.
Hence, the High Court dismissed the Revenue's appeal.
Counsel for Appellant/ Revenue: S.C. Keyal
Counsel for Respondent/ Assessee: G.N. Sahewalla and H.K. Sarma
Case Title: Commissioner Of Central Excise and Service Tax versus M/S North Eastern Cables & Conductors Private Limited
Case Number: C.Ex.App./6/2020