Upholds extended period invocation where service tax short-paid despite rate enhancement knowledge: CESTAT

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Fact of case: M/s Shikha Constructions (“the Assessee”) is engaged in providing works contract services as defined under Section 65 (zzzza) of Finance Act, 1944 (Act) and erection, commissioning and installation services as defined u/s 65 (39a) of the Act. A show cause notice was issued pursuant to verification of ST-3 finding that assessee was paying service tax at the rate of 10.3 %, however, w.e.f. April 01, 2012 the rate has been enhanced to 12.36% proposing the short-payment to be recovered along with interest at appropriate rate and proportionate penalty on account of wilful suppression of fact of short payment of Service Tax with an intention to evade same.

Applicant’s Interpretation of Law: The assessee contended that due to no knowledge of this enhancement, it continued paying duty at the previously prevalent rate of 10.30% and the moment enhancement came to notice, it started paying tax at 12.36%. He submitted that there was no wilful suppression, however, the revenue was not entitled to invoke extended limitation period as the dispute is just of 3 months, which is a reasonable time to acquire knowledge about any change/amendment in the existing provision of law.

Held: The Hon’ble CESTAT concluded that the failure on assessee’s part amounts to violation of the provisions of the Act. CESTAT reiterated that “Non-disclosure of the impugned admitted short-levy till the audit conducted by the Department is definitely a suppression of relevant fact arising out of appellants own fault”. Hence, CESTAT stated that the possibility of said suppression with clear intention to evade the said short payment cannot therefore be ruled out. Therefore, opined that assessee had deliberately not made the payment and affirmed the demand along with interest and penalty.

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