The Principal Commissioner, C G S T And Central Excise, G S T Bhavan vs. Mammen Engineering Works

Facts

The appellant, Principal Commissioner, CGST and Central Excise, filed an appeal against an order of the Customs, Excise & Service Tax Appellate Tribunal (Tribunal). The Tribunal had remitted the case of the respondent, Mammen Engineering Works, back to the Commissioner to calculate service tax liability for the period prescribed under Section 73(1) of the Finance Act, 1994, without invoking the proviso for extended limitation. The respondent, a sub-contractor, received ₹19,30,94,411.00 for fabrication, erection, and commissioning work. They did not pay service tax, claiming it was paid by the main contractors, who provided certificates. A show cause notice was issued for financial years 2007-08 to 2010-11 and part of 2011-12, invoking the extended period of limitation due to non-disclosure in ST-3 returns. The respondent argued that the main contractors had paid the tax, and there was a bona fide belief regarding the liability due to ongoing interpretational issues.

Held

The Court held that the extended period of limitation under the proviso to Section 73 of the Finance Act, 1994, could not be invoked against the respondent. The Court reasoned that there was an interpretational issue regarding the liability of sub-contractors to pay service tax, which was ultimately settled in 2019. The existence of such a dispute, coupled with the fact that the main contractors had paid the service tax, indicated a bona fide belief on the part of the respondent. Relying on Supreme Court judgments in Commissioner, Central Excise and Customs v Reliance Industries and Continental Foundation Jt. Venture v Commissioner of Central Excise, Chandigarh-I, the Court emphasized that a bona fide belief, even if ultimately found incorrect, cannot be considered suppression of fact unless it was a deliberate act to evade duty. Mere omission to provide correct information, without intent to evade tax, does not amount to suppression. Therefore, the Tribunal's order remitting the case to the Commissioner to calculate service tax liability without invoking the extended period of limitation was deemed justified. The Court found no substantial question of law arising for consideration.

Key Issues

1. Whether the extended period of limitation under the proviso to Section 73 of the Finance Act, 1994, can be invoked against the respondent when there was a bona fide belief regarding service tax liability due to interpretational issues and payment by the main contractor? The appellant contended that Section 71A mandates filing returns, and non-disclosure of service tax payment in the ST-3 return constituted willful defiance, justifying the invocation of the extended period of limitation under Section 73. They relied on Commissioner of Central Excise, Visakhapatnam v Mehta and Company to argue that ignorance does not grant privilege. The respondent argued that the payment of service tax by a sub-contractor was under adjudication with differing views from various Tribunals. They cited Commissioner of Service Tax v M/s Melange Developers Private Limited and highlighted that the main contractor had already paid the service tax, demonstrating the respondent's bona fide. Therefore, the proviso to Section 73 could not be invoked.