By TIOL News Service

MUMBAI, SEPT 16, 2015. THE appellants are engaged in providing ‘Installation and Commissioning of Plant and Equipment' services to various clients and obtained registration in February 2005. During the course of audit it was observed that during the period from November 2004 to February 2005,appellant had charged service tax on invoices raised only to those clients who agreed to pay service tax.

A SCN dated 08.06.2009 was, therefore, issued to the appellants seeking recovery of ST of Rs.46,62,677/- on the taxable services provided by them during the period 01.07.2003 to September 2005 and imposition of penalties and interest.

The Adjudicating authority dropped the demand for the period 1.7.2003 to 31.3.2004 on ground of limitation and confirmed the rest with interest and penalty.

The appellant was not successful before the Commissioner(A) and is, therefore, before the CESTAT.

It is submitted that the entire demand is hit by limitation inasmuch as the records of the appellant were audited by the audit section in 2006 and no objections were raised and it was pursuant to the subsequent audit which took place in 2008 for the period in question that the demand was raised by invoking extended period of limitation. Reliance is placed on the decision in MTR Foods Ltd. - 2011-TIOL-696-HC-KAR-CX.

The AR supported the order of the lower authoirty.

The Bench observed -

++ It is noticed by us that the records of appellants were audited by the audit party of the Revenue in 2006 and vide audit report no 288/2006-07, for a period on 01/04/2003 to 31/12/2006, the authorities raised various queries but not in respect of the short payment of service tax as is alleged in the show cause notice in question in this appeal. We find that the audit party of the revenue in the 2 nd audit conducted by them in 2008, vide audit report no 46/2008-09 came to conclusion that there was short payment of duty with intention to evade Service Tax. The show cause notice in the case on hand was issued based upon the 2 nd audit report.

++ In our view the entire demand is to be set aside on the ground on limitation only. Revenue authority cannot invoke the extended period of limitation when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has misstated or suppressed the facts from the department.

Noting that in view of the authoritative judicial pronouncements in Rajkumar Forge Ltd. - 2010-TIOL-622-HC-MUM-CX and MTR Foods Ltd. - 2011-TIOL-696-HC-KAR-CX extended period cannot be invoked for demanding service tax from the appellant, the entire demand was set aside.

The appeal was allowed.

(See 2015-TIOL-1947-CESTAT-MUM)