CESTAT | Even 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; Tribunal decides

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta (President) and C.J. Mathew (Technical Member) allowed an appeal which was filed against the order passed by Principal Commissioner of Central Excise, New Delhi, by which the demand of service tax had been confirmed with interest and penalty.

Appellant had been engaged in rendering air travel agent and other tour related services and during the period of dispute the appellant was rendering air travel agent services to the Embassy of the United States of America. The appellant claimed that it was the sole and exclusive service provider for the US Embassy and operated from a desk set up within the premises of the US Embassy. On such services, the appellant was availing exemption from payment of service tax in terms of Notification dated 23-05-2007 till 30-06-2012 and, thereafter, under Notification dated 20-06-2012. These Notifications exempted services rendered to diplomatic mission or consular posts in India from payment of service tax. In 2014, an investigation was initiated and audit of the records of the appellant was conducted in terms of rule 5A of the Service Tax Rules, 19944. During the audit, it was observed that the appellant was incorrectly availing exemption on services rendered to the US Embassy. The audit resulted into issuance of a show cause notice dated 16.04.2014 proposing to deny the exemption as a result of which a demand of service tax amounting to Rs. 81,11,575 was made. Principal Commissioner had passed the impugned order dated 30-09-2015 denying the exemption to the appellant and confirming the demand of service tax with penalty.

The four issues framed by the Principal Commissioner were:

(a) Whether the exemption contained in the Notification dated 23.05.2007 upto 30.06.2012 and Notification dated 20.06.2012 w.e.f. 01.07.2012 is available to the appellant for the services provided by it to the US Embassy despite the non-fulfillment of the conditions laid down in the said Notifications and whether, the service tax can be recovered and demanded from the appellant in the event it is not entitled to the exemption?

(b) Whether the appellant fulfilled its duty for amending the changed address in the Registration Certificate as per the provisions of Act and if not so, whether penalty is leviable?

(c) Whether the extended time period can be invoked?

(d) If yes, whether the appellant is liable for payment of interest & penalty under the provisions of Act/Rules, as alleged in the show cause notice?”

Bare perusal of the Notification in issue dated 23-05-2007 indicated that the following conditions have to be satisfied:

  1. Services must have been rendered to a diplomatic mission or consular post in India;
  2. The Protocol Division of the Ministry of External Affairs11 must issue a certificate to the specified diplomatic mission or consular post in India stating that it is entitled to claim exemption from payment of service tax;

iii. The diplomatic mission or consular office must provide the taxable service provider an authenticated copy of such certificate along with an original undertaking (signed and serially numbered) stating that the services have been received for official purpose; and

  1. The invoice raised by the service provider must carry the date and serial number of the undertaking.

In the present case the first condition was fulfilled second condition states that the Protocol Division must issue a certificate to the diplomatic/consular post in India. In this regard, the US Embassy was issued certificates from the Protocol Division and this has not been disputed by the Department and third condition relates to providing certificates and original undertakings by the diplomatic mission/ consular post in India to the service provider. Fourth condition to the Exemption Notification mentions that the invoices issued by the service provider must carry the serial number and date of the undertaking. The purpose of this condition is to ensure proper correlation between the services rendered and the exemption claimed by the service provider. The show cause notice has alleged that the invoices did not carry the serial number of the undertakings. The exemption was sought to be denied on this ground and the impugned order has also confirmed such denial.

Counsel for the appellant submitted that from the entire chain of the aforesaid documents there was no room to doubt that the services were rendered by the appellant to the US Embassy and such services were exempted by virtue of the undertaking and certificate provided by the US Embassy to the appellant.

The Tribunal explained that Notifications was issued by the Central Government of India in the public interest to exempt taxable services provided to a foreign diplomatic mission or consular post in India. As is evident from clause (i) of both the Notifications, the underlying purpose is to uphold the principle of reciprocity amongst the nations. It is only to ensure that there is no evasion of tax and that services have been rendered specifically to those diplomatic missions/ consular officers to whom a certificate has been issued by the Protocol Officer that the Notifications require a correlation to be established between the invoices and the undertakings. Once these two documents can be correlated, though not in a manner provided for, the substantive conditions to the Exemption Notifications stand fulfilled and the exemption cannot be denied and considered the judgments in Lakshmiratan Engineering Works Ltd. v. Assistant Commr. (Judicial) l Sales Tax, 1967 (9) TMI 116, J.K. Manufacturers Ltd. v. Sales Tax Officer, 1969 (5) TMI 54 and Chunni Lal Parshadi Lal v. Commr. of Sales Tax, 1986 (3) TMI 297.

The Tribunal further made it clear that even 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, cannot be sustained.

The appeal was allowed by the Tribunal.[SOTC Travels Services (P) Ltd. v. Principal Commr. Of CE, 2021 SCC OnLine CESTAT 2574, decided on 20-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Join the discussion

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.