The Delhi High Court has barred the GST dept from invoking extended limitation against subcontractors amid service tax confusion as to his liability to pay service tax.
The bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta has observed that the show cause notice dated 23rd October 2010 issued by the Commissioner of Service Tax, New Delhi is a composite show cause for the entire five years period i.e. 2004 to 2009.
The Appellant, The Commissioner of Central Tax, CGST Delhi East under Section 35G of the Central Excise Act, 1944, as made applicable under the Finance Act, 1994 read with Section 174 of the Central Goods and Service Tax Act, 2017.
The appeal challenged the order bearing passed by the Customs Excise and Service Tax Appellate Tribunal, New Delhi (CESTAT).
The issue raised whether under Section 73(1) of the Finance Act, 1994, the Department could have invoked the extended period of limitation of five years for raising a demand on the respondent-assessee.
Another question which is raised in the present appeal is whether the Respondent as a sub-contractor was liable to pay service tax or not. The said issue was clarified by the Department of Revenue. The circular stated that even sub- contractors were required to pay service tax.
However, during that entire period i.e. 2004 to 2007, there was an uncertainty as to whether service tax would be liable to be paid or not. In view thereof, it appears that the Respondent did not pay the service tax.
The Department submitted that this non-payment constitutes suppression, wilful mis-statement and fraud and hence, invokes the extended period of limitation.
The CESTAT has held to the contrary and is of the opinion that there was a bona fide belief of the sub-contractor i.e. Respondent.
The court dismissed the appeal and held that since there was no wilful misstatement or fraud and the CESTAT holds the same to be a bona fide belief of the assessee, interference with the impugned order is not warranted in the present appeal.
Case Details
Case Title: The Commissioner Of Central Tax, Cgst Delhi East Versus M/S Simplex Infrastructure Limited
Case No.: CEAC 3/2024
Date: 27th March, 2025
Counsel For Appellant: Shubham Tyagi
Counsel For Respondent: Rajeev Kumar
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