Chennai CESTAT Accepts Audit Record Of Glazing Contractor’s ₹10.9 Lakh Tax Payment, Sets Aside Penalties And Time-Barred Balance

The appellant provided façade fabrication and installation services, including to its associated enterprise, Consolidated Construction Consortium Ltd.

An audit alleged service-tax short-payment for June 2008 to August 2009.

The adjudicating authority confirmed a total demand of ₹23,05,156 with interest and an equivalent penalty; the Commissioner (Appeals) rejected the appellant’s appeal.

The appellant then appealed to the Tribunal.

Under the Explanation to the third proviso to Rule 6(1) of the Service Tax Rules, 1994, the special timing rule for associated enterprises applies to credit or debit entries in their books; it does not apply merely because the parties are associated where consideration is accounted for upon actual receipt.

Under the proviso to Section 73(1) of the Finance Act, 1994, the extended limitation period requires more than mere non-payment or failure to file returns: absent fraud, suppression or wilful misstatement, there must be a positive act indicative of wilful default. The Tribunal relied on Easland Combines v. Collector of Central Excise and Uniworth Textiles Ltd. v. Commissioner of Central Excise for that principle.

It also applied the distinction between an underlying liability and the remedy for enforcing it: limitation may bar recovery without extinguishing the liability, but does not itself revive a time-barred recovery remedy.

The adjudicating authority had accepted that the Rule 6(1) Explanation did not apply where consideration was actually received, leaving the question whether the tax had been paid.

The Tribunal found that the audit annexure, included with the appeal, recorded that ₹10,90,151 had been paid on 10 September 2009; the adjudication record also showed payment of ₹12,15,005, which had been appropriated to the demand.

Separately, the record disclosed no deliberate attempt to evade tax, so the extended period and penalties could not stand.

The Tribunal held that any unpaid balance outside the normal limitation period was unenforceable, while amounts already paid could be appropriated to the corresponding liabilities.

It directed that service tax already paid be appropriated to the corresponding liability, set aside any remaining demand barred by limitation, and set aside the penalties.

The appellant was granted consequential relief, if any, in accordance with law.