Extended limitation cannot be invoked solely on third-party data absent evidence of suppression.

Based on third-party data received from the Income Tax Department through EDW-06 for FYs 2015–16, 2016–17 and 2017–18, the Department initiated an inquiry against the Appellant.

As the Appellant allegedly did not submit the requested financial records, the Department determined service-tax liability from the Income Tax data and issued a Show Cause Notice dated 21 April 2021, demanding ₹5,64,780 for the period April 2015 to June 2017, with interest and penalties, by invoking the extended limitation period.

The Adjudicating Authority confirmed the demand, appropriated ₹5,64,780 towards service tax and ₹3,21,000 towards interest, and imposed penalties under Sections 77 and 78 of the Finance Act, 1994.

The Commissioner (Appeals) upheld the adjudication order.

Before the Tribunal, the Appellant challenged the demand solely on limitation and did not contest the merits.

1. Whether the extended period of limitation under Section 73 of the Finance Act, 1994 could be invoked where the service-tax demand was based entirely on third-party data obtained from the Income Tax Department, without specific evidence of suppression, wilful misstatement, fraud or collusion.

2. Whether the demand raised through the Show Cause Notice dated 21 April 2021 for the period April 2015 to June 2017 was barred by limitation.

The Tribunal applied Section 73 of the Finance Act, 1994, governing recovery of service tax and limitation, including the extended period where non-payment is attributable to fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade tax.

It relied on M/s Antares Services Pvt. Ltd. v. CCE, Chandigarh, 2024 (388) E.L.T. 200 (Tri.-Chan.), which held that the extended period cannot be sustained merely on the basis of third-party information in the absence of evidence establishing suppression or other specified grounds.

The Tribunal also followed Balajee Machinery, 2022 (66) G.S.T.L. 440 (Tri.-Kol.), which held that a demand based merely on Income Tax Department data does not, by itself, justify alleging suppression for invoking extended limitation.

The Tribunal noted the principle from M/s Ariane Orgachem Pvt. Ltd. v. Wyeth Employees Union, (2015) 7 SCC 561, that a pure question of law may be raised at any stage of litigation.

The Tribunal found that the entire proceedings originated from third-party Income Tax Department data and that the Department had invoked the extended limitation period without producing independent evidence of suppression, wilful misstatement, fraud, collusion or intent to evade service tax.

Applying the ratio of Antares Services and Balajee Machinery, it held that third-party information alone could not legally support invocation of the extended period.

Since the demand for April 2015 to June 2017 was therefore not sustainable beyond the applicable normal limitation period, the Tribunal treated the demand as time-barred and considered it unnecessary to examine the Appellant’s challenge on merits.

It set aside the impugned Order-in-Appeal dated 8 May 2024 and allowed the appeal solely on limitation, without examining the merits of the service-tax demand.