CESTAT Overturns Extended Limitation Period in Service Tax Case Against Omaxe Buildhome

Tribunal rules that extended limitation under Section 73(1) of the Finance Act, 1994, cannot be invoked without evidence of deliberate suppression of facts.

In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Principal Bench in New Delhi has overturned the decision of the Commissioner of GST Delhi-East, which had upheld the invocation of the extended limitation period against M/s. Omaxe Buildhome Limited. The case involved a demand of service tax on car parking charges for the period between July 2010 and June 2012, with the department alleging that the extended period of limitation was applicable due to suppression of facts.

The Tribunal, presided over by Mr. Justice Dilip Gupta and Mr. P.V. Subba Rao, concluded that the extended limitation period under Section 73(1) of the Finance Act, 1994, is only applicable when there is evidence of intentional suppression of facts with the intent to evade tax. The Tribunal emphasized that mere non-disclosure or a bona fide belief in non-taxability does not amount to suppression.

The appellant, Omaxe Buildhome Limited, argued that they had acted under the bona fide belief that service tax was not applicable to car parking charges during the specified period, a belief that they argued was rooted in the legal framework prior to the introduction of the negative list in July 2012. The Tribunal concurred with the appellant's stance, noting that the appellant had been transparent in their tax returns and that the issue was one of legal interpretation, not a deliberate attempt to evade tax.

The Tribunal also criticized the department for failing to scrutinize the returns thoroughly, pointing out that the responsibility to verify and assess lies with the department under the self-assessment scheme. The Tribunal cited several precedents, including judgments from the Supreme Court, which consistently held that intent to evade must be proven with deliberate action, not assumed from non-disclosure alone.

This judgment reaffirms the principle that for the extended limitation to apply, the department must demonstrate not only suppression of facts but also an intent to evade taxes. The ruling is expected to impact similar cases where the extended period of limitation has been invoked without substantial evidence of intent to evade tax.

Bottom Line:

The extended period of limitation under Section 73(1) of the Finance Act, 1994 cannot be invoked unless there is deliberate suppression of facts with intent to evade payment of service tax. Mere non-disclosure or belief in non-taxability does not constitute suppression. It is also the duty of the officers to scrutinize returns and verify assessments under the self-assessment regime.

Statutory provision(s): Section 73(1) of the Finance Act, 1994

M/s. Omaxe Buildhome Limited v. Commissioner of GST Delhi-East, (CESTAT)(New Delhi)(Principal Bench) : Law Finder Doc Id # 2813962