2018 (9) TMI 262 – MADRAS HIGH COURT – 2018 (18) G. S. T. L. 589 (Mad.) – Extended period of limitation – penalty – non registration, non payment and non filing of returns – bonafide belief – no suppression of facts – Whether the Department was justified in invoking the extended period of limitation and also imposing penalty?
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Held that:- In the instant case, there was no allegation of fraud or suppression or wilful mis-statement against the assessee. The Department, even in the said SCN, stated that the assessee was liable to pay service tax and get himself registered from the year 2007-08 whereas he got himself registered only in the year 2012.
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The law on the subject as to whether the extended period of limitation could have been invoked when there were two views within the Department itself i.e. when certain Original Authorities hold that the services are taxable services and certain Appellate Authorities hold otherwise – When there is scope for doubt in the mind of the
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payment and non filing of returns, which were statutorily required to be complied, whether the Tribunal was justified in holding that there was no suppression of facts and that the issue of show cause notice was hit by limitation?" 3. The Department issued the show cause notice dated 19.10.2012 stating that the respondent assessee received commission for promoting, marketing and selling the goods produced by M/s.Herbalife International India Private Limited and that the assessee is one of the independent distributors of multi-level marketing company. The assessee had obtained service tax registration on 17.7.2012 for providing taxable services mentioned in 'other than negative list'. 4. In the said show cause notice, after examining the nature of transaction between the assessee and the principal, the Original Authority stated that the principal raised bills on the sale of products to their distributors by raising sale invoices and charges and value added tax on them. How
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Proviso to Section 73(1) of the Finance Act, 1994 for the period from 2007-08 to 2011-12; as to why the amount paid by him on 16.8.2012 should not be appropriated towards the demand of service tax; as to why interest applicable should not be demanded; and as to why penalty should not be imposed. 7. The assessee filed his reply, which was rejected and the proposals made in the show cause notice were confirmed vide the Order-in-Original dated 17.10.2014. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Central Excise (Appeals). The First Appellate Authority, by order dated 30.6.2016, rejected the appeal, against which, the assessee preferred an appeal before the Tribunal. 8. One of the grounds raised in the appeal filed before the Tribunal was as to whether the Adjudicating Authority could have levied penalty under Section 78 of the Finance Act, 1994, since the case of the assessee is squarely covered under Section 73(3) of the Finance Act, 1994 since t
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ion, which falls for consideration, is as to whether the Department was justified in invoking the extended period of limitation and also imposing penalty. 12. The Tribunal, while considering the correctness of the order passed by the First Appellate Authority, referred to the decision of their New Delhi Bench in the case of Charanjeet Singh Khanuja Vs. CST, Indore [reported in (2016) 68 Taxmann.com 60] and held that if two findings are possible, the longer period of limitation under the Proviso to Section 11A(1) cannot be invoked. There is no dispute with regard to the fact that the decision in Charanjeet Singh Khanuja has attained finality and that the Department has not preferred any appeal against the said decision. 13. The law on the subject as to whether the extended period of limitation could have been invoked when there were two views within the Department itself i.e. when certain Original Authorities hold that the services are taxable services and certain Appellate Authorities
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cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. 11. Factual position goes to show the Revenue relied on the circular dated 23.5.1997 and dated 19.12.1997. The circular dated 6.1.1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (supra) was held to be not correct in a subsequent Larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application
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ion and non-availability of the extended period of limitation, the appeals are allowed. 14. In the instant case, there was no allegation of fraud or suppression or wilful mis-statement against the assessee. The Department, even in the said show cause notice, stated that the assessee was liable to pay service tax and get himself registered from the year 2007-08 whereas he got himself registered only in the year 2012. The Tribunal, in the decision in Charanjeet Singh Khanuja, considered an identical issue in a batch of cases and pointed out that when, on the issue involved in the batch of cases, there were two views in the Department itself, it cannot be said that on the question as to whether the activity of the assessee was taxable under Section 65(105) (zzb) read with Section 65(19) of the Finance Act, 1994, there was no scope for doubt. Thus, it held that when there is scope for doubt in the mind of the assessee on a particular issue, the longer period under the Proviso to Section 11
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es did not apply for service tax registration or did not file ST-3 returns or did not declare their activities to the jurisdictional Central Excise Authorities, it cannot be inferred that this was a wilful act with intent to evade payment of service tax. We also take notice of the fact that in respect of appeals filed by the Revenue, the Commissioner (Appeals), after analysing the activities of the assessees, had taken the view that the same is not covered by the definition of 'business auxiliary service' under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994. When, on the issue involved in these group of cases, there were two views in the Department itself, it cannot be said that on the question as to whether the activity of the assessees was taxable under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994, there was no scope for doubt. As held by the Apex Court in the case of Continental Foundation Joint Venture Vs. CCE [(2007) Taxman
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