Extended period of limitation can be invoked only when suppression or collusion is willful with an intent to evade tax

The CESTAT ruled that the extended period of limitation for tax evasion can only be invoked if suppression or collusion is proven to be wilful and intended to evade tax. In this case, the appellant had declared the use of exemption notifications in their returns, meaning there was no suppression of facts. Therefore, the extended period of limitation was not applicable, and the original order was set aside as it went beyond the initial allegations.

In M/s. SOTC Travels Services Pvt Ltd. v. Principal Commissioner of Central Excise, Delhi-I [SERVICE TAX APPEAL No. 50046 of 2016 dated September 20, 2021] the current appeal has been filed challenging Order in Original No. 33/ST/D-I/2015 dated September 30, 2015("OIO") passed by the Principal Commissioner of Central Excise, New Delhi ("the Respondent") which confirms denial of exemption and demand of interest and penalty.

A Show Cause Notice dated April 16, 2014 ("SCN") was issued to M/s. SOTC Travels Services Pvt Ltd ("the Appellant"), being air travel agent service provider to the Embassy of the United States of America, for incorrect availment of exemption of service tax on services rendered to diplomatic mission or consular posts in India under Notification No. 33/2007-ST dated May 23, 2007 and Notification No. 27/2012- ST dated June 20, 2012 ("Exemption Notifications")

The Respondent vide the OIO in question denied the exemption on the ground of Appellant not providing documentary proof regarding fulfilment of Service Tax Rules, 1994 and that the serial number and date of undertaking must be provided in the invoices issued by the service provider which was absent in the current case. The Respondent found that the Appellant had violated the provisions of the Exemption Notifications knowingly for the purpose of evading service tax and, therefore, invoked the extended period of limitation contemplated under the proviso to Section 73(1) of the Finance Act, 1994.

The Hon’ble CESTAT, New Delhi observed that the Appellant has provided that certificates received from the US Embassy were duly authenticated carrying stamps of the US Embassy. The OIO provided that the format of the undertaking in the certificate was not proper. Signaling to this argument, the Hon’ble CESTAT noted as long as the undertakings have been furnished, it is immaterial as to whether they were in the correct format or not, unless some relevant requirement was not contained in the undertaking so as to make the undertaking of no consequence.

Further, observed that the Appellant in the ST-3 returns had clearly mentioned about availing the benefit of the Exemption Notifications. It is for this reason that the Department cannot contend that the Appellant had suppressed any fact. Noted, when an assessee has suppressed facts, the extended period of limitation can be invoked only when "suppression‟ or "collusion" is wilful with an intent to evade payment of duty. The invocation of the extended period of limitation, therefore,in the current case is not sustainable.

Held that the OIO has gone beyond the allegations in the SCN, thereby being set aside.