Time-Barred Demands Cannot be Clubbed to Satisfy the Monetary Threshold for Filing Appeals Before High Courts

The Appellant (Department) challenged the CESTAT Kolkata order dated 08.02.2024, which set aside a Service Tax demand of ₹2,60,99,364/-.

The demand was issued via a composite show-cause notice dated 31.12.2020 covering four assessment years (2014-15 to 2017-18).

The Adjudicating Authority confirmed the demand based on Form 26-AS and financial statements, alleging suppression of facts to invoke the extended five-year limitation period.

The Respondent (Assessee) raised a preliminary objection regarding the maintainability of the appeal before the High Court, citing the Ministry of Finance Notification dated 06.08.2024, which raised the monetary limit for filing appeals to ₹2 Crores.

1. Whether the Department can raise a Service Tax demand solely based on entries in Form 26-AS.

2. Whether the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994, was permissible.

3. Whether the appeal is maintainable when the individual assessment year demands are below ₹2 Crores, but the composite total exceeds it.

4. Whether the demand for the assessment year 2014-15 was barred by the five-year limitation period under Section 73(1) of the Finance Act, 1994.

CBIC Instruction No. CBIC/160390/20/2024-JC-CBEC dated 06.08.2024, which mandates a minimum monetary limit of ₹2 Crores for Departmental appeals to High Courts.

Section 73(1) of the Finance Act, 1994, which provides a 30-month limitation for normal demands and a 5-year extended period for cases involving fraud or suppression of facts.

Circular No. 207/1/2024-GST, which provides that for composite orders, limits apply to the total tax amount.

While noting different High Court views on composite notices (Milroc Good Earth Developers vs. Ambika Traders), the court observed that even if clubbing were permissible, time-barred claims must be excluded first.

Upon reviewing the specific demand for 2014-15, the court found it was barred by the 5-year extended limitation period, even when accounting for the show-cause notice date of 31.12.2020.

Deducting the time-barred amount of ₹61,99,462/- from the total demand reduced the valid appeal value to ₹1,98,99,902/-, which falls below the ₹2 Crore mandatory threshold.

The court reasoned that a time-barred claim cannot be used to artificially reach the monetary limit for maintaining an appeal.

The court dismissed the appeal on the ground of non-maintainability without deciding whether valid demands may be aggregated to meet the threshold, leaving that question for a future case.