Kolkata CESTAT Sets Aside Patna Caterer’s ₹17.15 Lakh Service-Tax Demand As Time-Barred, Finding No Proof Of Deliberate Suppression.

The appellant, a registered service provider, filed ST-3 returns for the relevant period, which were NIL returns. Following information about a discrepancy between third-party data and the value declared in those returns, the Department investigated the appellant’s activities and issued a show-cause notice dated 24 December 2020, proposing Service Tax of ₹77,98,063 for October 2014 to June 2017, with interest and penalties, invoking the extended limitation period for alleged suppression.

The adjudicating authority confirmed ₹59,92,021; the Commissioner (Appeals) later reduced the demand to ₹17,15,341, with interest and penalties.

The appellant appealed to the Tribunal, principally challenging the invocation of the extended period.

The proviso to Section 73 of the Finance Act, 1994 permits an extended limitation period where non-payment or short-payment is attributable to specified culpable conduct, including suppression of facts with intent to evade tax; such intent must be established and cannot be inferred merely from a tax shortfall or omission.

In Chemphar Drugs & Liniments v. Collector of Central Excise, 1989 (40) E.L.T. 276 (S.C.), and Pushpam Pharmaceuticals Company v. Collector of Central Excise, 1995 (78) E.L.T. 401 (S.C.), the Supreme Court held that suppression for extended limitation requires more than mere inaction or failure to disclose.

Section 75 provides for interest on Service Tax due, while Sections 78 and 77(1)(c)(ii) concern penalties.

The Tribunal also relied on Mohammed Fajlur Haque v. Commissioner of C.G.S.T. and C.Ex., Malda, Final Order No. 75412 of 2026, concerning the need for evidence of suppression and the limits of relying on income-tax data and Form 26AS.

The Tribunal found that the appellant was registered and had filed statutory returns, even though they were NIL, and had furnished agreements, returns, financial statements and other records during the investigation.

It considered the appellant’s asserted understanding that its services were exempt, the authorities’ acceptance of exemption for a substantial part of the originally proposed demand, and the absence of corroborative evidence showing deliberate concealment or intent to evade tax.

The discrepancy between the returns and financial or income-tax records, without sufficient evidence of the statutory ingredients, did not justify extended limitation.

Independently, the Tribunal held that the demand for October 2014 to September 2015 fell beyond the maximum five-year period preceding the notice.

It set aside the impugned order insofar as it confirmed Service Tax of ₹17,15,341, together with interest and penalties, and allowed the appeal with consequential relief, if any.