The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that self-assessment by taxpayers is only a facility, and cannot be treated as dilution of central excise officers’ statutory responsibility.
The bench of Justice Dilip Gupta, (President) and P. V. Subba Rao, (Technical Member) has observed that the assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else.
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Background
The respondent/assessee is registered with the service tax department and has been providing taxable services of construction of residential complexes and has been paying service tax and filing its returns.
Its records for the period 2012-13, 2013- 14 and 2014-15 were audited and it was found that the appellant had considered sale of development rights as non-taxable and had not paid service tax on the consideration received for transfer of development rights.
The department felt that the transfer of development rights became a ‘service’ with effect from 1.7.2012 as per section 65B (44) of the Finance Act, 1994 and therefore, it was taxable. As per Rule 5 of the Point of Taxation Rules, 2011, tax was payable.
A show cause notice was issued by the department proposing demand of Rs. 7,11,91,036 as service tax along with interest under section 75 and penalties under sections 76,77 and 78 of the Finance Act.
The proposals in the SCN were dropped by the Commissioner. The Commissioner held that in case of transfer of development rights, the liability arises on the date of signing of the agreement since it actually arises on the date of providing the service.
The department has filed an appeal challenging the order of the commissioner.
Dept’s Arguments
The department argued that the date of rendition of service is after the date of the agreement which is the relevant date to be considered to determine if the service was taxable. The date of rendition of service is the date of invoice or the date of receipt of payment. The Commissioner erred in considering the date of agreement as the date of rendition of services and dropping the demand.
Assessee’s Arguments
The assessee contended that the service was rendered prior to the introduction of negative list, i.e., 1.7.2012 when the service was not taxable, whereas the demand has been proposed under the provisions after 1.7.2012 under Section 65B (44). No invoice was ever issued and the payments for transfer of development rights were received in terms of the agreements which were entered into prior to 1.7.2012. The demand cannot be sustained and has been correctly dropped by the Commissioner.
CESTAT’s Analysis
Central Excise Officer Has An Obligation To Make His Best Judgement
The CESTAT held that ‘the central excise officer’ has an obligation to make his best judgement if either the assessee fails to furnish the returns or, having filed the return, fails to assess tax in accordance with the Act and Rules. Thus, although all assessees self-assess tax, the responsibility of taking action if they do not assess and pay the tax correctly squarely rests on the central excise officer, i.e., the officer with whom the Returns are filed.
Central Excise Officer Empowered Under Finance Act, 1994 To Call Information
The CESTAT opined that the officer may require the assessee to produce accounts, documents and other evidence he may deem necessary. Thus, in the scheme of the Finance Act, 1994, the officer has been given wide powers to call for information and has been entrusted with the responsibility of making the correct assessment as per his best judgement.
If the officer fails to scrutinise the returns and make the best judgement assessment and some tax which escaped assessment is discovered after the normal period of limitation is over, the responsibility for any loss of Revenue rests squarely on the shoulders of the officer.
It is incorrect to say that had the audit not been conducted, the allegedly ineligible CENVAT credit would not have come to light. It would have come to light if the central excise officer had discharged his responsibility under section 72.
The tribunal held that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs in its Manual for Scrutiny of Service Tax Returns.
Taxpayer Not Duty Bound To Submit Documents Unless Asked For By the Central Excise Officer
The CESTAT held that the respondent assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else.
It is the responsibility of the Central Excise Officer with whom the Returns are filed to scrutinise them and if necessary, make the best judgment assessment under section 72 of the Finance Act and issue an SCN under Section 73 of the Finance Act within the time limit. If the officer does not do so, and any tax escapes assessment, the responsibility for it rests on the officer.
Loss Of Revenue Is The Risk Taken By The Board As A Matter Of Policy
The tribunal stated that although the Central Excise Officer is empowered to scrutinise all the Returns and if necessary, make the best judgement assessment, if, as per the instructions of CBIC, the officer does not conduct a detailed scrutiny of the Returns and as a result is unable to discover any short payment of tax within the period of limitation, neither the assessee nor the officer is responsible for loss of revenue. The a loss of Revenue is the risk taken by the Board as a matter of policy.
Situations Where Extended Period Of Limitation Be Invoked
Extended period of limitation cannot be invoked unless there is evidence of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of the Finance Act or Rules with an intent.
Intentional and wilful suppression of facts cannot be presumed because the appellant was operating under self-assessment or because the appellant did not agree with the audit or because the officer did not conduct a detailed scrutiny of the Returns and the escapement of tax was discovered only during audit.
Conclusion
The CESTAT dismissed the appeal filed by the department and uphold the commissioner’s order.
Read More: No Service Tax Payable On ‘Construction Of Residential Complexes’: CESTAT
Case Details
Case Title: Commissioner Of Central Goods & Service Tax, Delhi South Commissionerate Versus M/S Haamid Real Estate Pvt Ltd
Case No.: Service Tax Appeal No. 52273 Of 2018 With Service Tax Cross No. 51100 Of 2018
Date: 04.11.2024
Counsel For Appellant: AR S. K. Meena
Counsel For Respondent: CA Atul Gupta
