Extended Period Of Limitation - Jurishour No. 1 Latest Tax

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that an extended period of limitation cannot be invoked in revenue neutral cases.

The bench of R. Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member) have observed that the Service Tax if required to be paid, would be eligible to them as Cenvat Credit / Refund, which would result in revenue neutral situation. It is the trite of the Tribunals and Courts to hold that the extended period provisions do not survive.

Background

The appellants/assessees are 100% Export Oriented Undertaking registered with Software Technology Parks of India (STPI) Kolkata, engaged in providing services in the category of Information Technology Software Services, holding Service Tax registration certificate.

After verification the Department found that the Appellant had incurred expenditure in foreign currency towards consultancy charges, database usage and they have also paid royalty/management/consultancy fee for receiving such services from outside India. As per Revenue, this would be covered under “import of Services” under Section 66A of the Finance Act,1994 read with Taxation of Services (Provided from outside India and received in India) Rules 2006.

A Show Cause Notice was issued on 23.10.2013, by invoking the extended period provisions, for the period 2008-09 to 2011-12, demanding Service Tax.

The appellants made their submissions questioning the quantification and provided documentary evidence towards their defence and submitted that they are not required to pay the demanded amount. After due process, the Adjudicating authority dropped the demand to the extent of Rs.57,17,640 and confirmed the balance demand of Rs.1,27,46,702.

Arguments

The assessees contended that while in the books of accounts they have provided for the amount to be paid to the overseas entity [USD 2490000], due to severe recession, after mutual discussion and understanding with the overseas exporter, this amount was never paid to them. The details of the non-payment to them would be proved by way of duly certificate issued by the Chartered Accountant, Income Tax entries, Bank Certificate etc. which are enclosed with the Appeal paper book.

The assessee argued that the legal services were brought under Service Tax bracket to be paid on Reverse Charge basis only with effect from 1.7.2012. The period involved in the present proceedings are 2009-10 and 2010-11. Hence, no Service Tax is required to be paid to the extent of Rs.5,65,983. The expenditure is on account of the Salaries paid, which are not liable for any Service Tax payment

The assessee contended that the expenses have been incurred by an overseas entity on behalf of the appellant and the same has been reimbursed to them. This expenditure is not towards any direct provided by the overseas entity.

The department contended that though the appellants are registered under Service Tax provisions, they have not declared the details of the expenditure incurred on account of foreign exchange outflow on various services received from overseas parties. In terms of Section 66A, the appellants are required to pay the Service Tax on Reverse Charge basis. The Revenue has undertaken detailed verification of the P & L accounts and Balance Sheet to stumble upon the foreign exchange outflow and after this Show Cause Notice has been issued.

The Adjudicating authority after noticing that some amount of foreign exchange for which provision was made in the Balance Sheet was not paid to the exporter of service, has dropped the demand thereon. Thus, the demand on the balance amount of demand is wholly justified.

Conclusion

The tribunal while allowing the appeal held that as no case of suppression on the part of the Appellant can be fastened in the matter and in view of the revenue neutrality, the entire demand pertaining to the extended period stands set aside on account of time bar.

FAQs

Can Extended Period Of Limitation Be Invoked In Revenue Neutral Cases?

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case of M/s. Sun Knowledge Pvt.Ltd. v/s Commissioenr of Service Tax has held that an extended period of limitation cannot be invoked in revenue neutral cases.