Tharwani Infrastructures vs. Commissioner Of CGST And Central Excise And Ors

Facts

The Revenue (Commissioner of CGST & Central Excise, Thane – Rural) appealed against an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which had allowed an appeal filed by the Respondent (Tharwani Infrastructures). The Respondent was engaged in providing taxable construction of complex services. Following a Supreme Court judgment upholding the levy, the Respondent obtained service tax registration and paid self-assessed service tax and interest for the period 2010-11 to 2015-16, totaling Rs. 7,07,02,774/-. Subsequently, the Revenue issued a show cause notice on April 27, 2017, invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994, alleging suppression of facts and intent to evade service tax. The CESTAT had allowed the Respondent's appeal against the Order-in-Original.

Held

The Court held that the CESTAT was correct in its findings. Regarding the intention to evade service tax, the Court agreed with the CESTAT that the Respondent's act of paying the entire service tax and interest prior to the issuance of the show cause notice clearly indicated no intention to evade payment of service tax. The Court noted that evasion implies defeating the provisions of law by trickery or subterfuge. Since the Respondent paid the dues before the notice, the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, was wrongly invoked by the Revenue. Consequently, the penalties levied under Sections 77 and 78 were also set aside. The Court found no merit in the Revenue's appeal and dismissed it. The Court also directed the designated officer to consider the Respondent's refund application expeditiously, within six weeks, in light of the dismissal of the Revenue's appeal.

Key Issues

1. Whether the CESTAT was correct in holding that the intention to evade service tax was absent in the present case, as required for invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994? The Petitioner argued that the Respondent's actions, including delayed registration and payment, demonstrated suppression of facts with intent to evade tax. The Respondent contended that payment of service tax and interest prior to the show cause notice negated any intention to evade. 2. Whether the CESTAT was correct in setting aside the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994? The Petitioner argued that the conditions for extended limitation were met. The Respondent argued that the extended period was wrongly invoked as there was no deliberate evasion. 3. Whether the CESTAT was correct in applying Section 73(3) of the Finance Act, 1994, without properly appreciating Section 73(4)? The Petitioner argued that Section 73(4) overrides Section 73(3) in cases of fraud or suppression. The Respondent argued that Section 73(3) was applicable as tax and interest were paid voluntarily. 4. Whether the CESTAT was correct in setting aside the penalties levied under Sections 77 & 78 of the Finance Act, 1994? The Petitioner argued that penalties were justified due to suppression and evasion. The Respondent argued that penalties were consequential to the wrongful invocation of the extended period and the finding of no evasion. 5. Whether the CESTAT was correct in not following its own decision in Master Marine Services P. Limited?