Custom, Excise & Service Tax Tribunal
M/S Krishan Pal Singh vs Cgst Kanpur on 15 January, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.II
Service Tax Appeal No.70835 of 2025
(Arising out of Order-in-Appeal No.166-ST/APPL/ALLD/2025 dated
03/09/2025 passed by Commissioner (Appeals) Customs, Central Excise &
CGST, Allahabad)
M/s Krishan Pal Singh, .....Appellant
(Kunwarpur Chungee Ke Peeche,
Kurawali, Mainpuri-205265)
VERSUS
Commissioner of Central Excise &
CGST, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur-208005) APPEARANCE:
Ms Stuti Saggi, Advocate for the Appellant Shri Santosh Kumar, Authorised Representative for the Respondent CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70025/2026 DATE OF HEARING : 15 January, 2026 DATE OF DECISION : 15 January, 2026 SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.166- ST/APPL/ALLD/2025 dated 03/09/2025 passed by Commissioner (Appeals) Customs, Central Excise & CGST, Allahabad. By the impugned order, Commissioner (Appeals) has rejected the appeal wherein following has been held:-
"ORDER
1. I confirm the demand of Service Tax amounting to Rs.2,04,000/- (Rupees Two Lac Four Thousand Only) including Swachh Bharat and Krishi Kalyan Cess not paid for the period FY 2016-17 and order for its recovery under Service Tax Appeal No.70835 of 2025 2 the provisions of Section 73(1) of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017.
2. I order to recover interest at the appropriate rates on the aforesaid demand of Service Tax under the provisions of the Section 75 of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017.
3. I impose a penalty of Rs. 2,04,000/- (Rupees Two Lac Four Thousand Only) under Section 78 of the "Act' read with Section 174 of CGST Act, 2017 upon the party for contravention of various provisions of the Act/Rules discussed hereinabove.
4 I impose penalty of Rs. 10,000/- [Rupees Ten Thousand only) each under the provisions of Section 77(1)(a), 77(1)(c), 77(1)(d) & 77(2) of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017, upon the party for not furnishing information and produce the documents called by the Central Excise Officer.
5. I order to recover from the party, late fee at the rate of Rs.20,000/- [Rupees Twenty Thousand only] for every return not filed from FY 2016-17 under the provisions of Section 70 of the Finance Act, 1994, read with Rule 7(C) of Service Tax Rules 1994 read with Section 174 of the CGST Act, 2017, for failure to deposit the service tax on due date.
However, if the Service Tax and interest is paid within a period of thirty days of the date of receipt of this order, the penalty payable shall get reduced to twenty five percent of the confirmed amount, in terms of provisions of Section 78 of the Act provided that the reduced penalty is also paid within thirty days of this order." 2.1 Appellant was engaged in providing services under Section 65B(44) of the Act without obtaining any registration from the department. The said services are not covered in the Negative list under Section 66B of the Finance Act, 1994 nor exempted.
2.2 On the basis of information provided by the CBDT for the period 2016-17 that the appellant have shown to have received Service Tax Appeal No.70835 of 2025 3 the consideration of Rs.13,60,000/- against sale of service in their ITR for the corresponding period. However, as per record no service tax was found to have been discharged.
2.3 An inquiry was initiated by the department to ascertain the nature of services provided and the leviability of service tax thereon, if any. During the course of investigation the appellant was requested to provide certain documents which could enable the department to see that whether there was any evasion of service tax on the considerations received by appellant during the material period. Appellant did not respond, hence the demand was quantified on the basis of available figures. It was observed that appellant had short paid service tax as detailed in table below:-
Period Gross Value S. Tax payable S. Tax short paid 2016-17 1360000 204000 204000 2.4 Alleging suppression, a show cause notice dated 18.10.2021 was issued to the appellant asking them to show cause as to why:-
"(i) An amount of Rs. 13,60,000/- (Rupees Thirteen Lacs Sixty Thousand Only) should not be treated as the value of taxable services provided by them during the Financial Years 2016-17, and accordingly Service Tax amounting to Rs.2,04,000/- (Rupees Two Lakhs Four Thousand Only) as detailed in Table-A not paid /short paid including Swachh Bharat Cess and Krishi Kalyan Cess should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994 as amended read with Section 174 of the CGST Act, 2017;
(ii) Interest at the appropriate rate should not be charged and recovered from the "Noticee' in respect of amount of service tax mentioned at S.No. (i) above under Section 75 of the "Act" read with Section 174 of CGST Act, 2017;
(ii) Penalty should not be imposed upon them in respect of amount of service tax mentioned at S.N. (1) above under Service Tax Appeal No.70835 of 2025 4 Section 78 of the 'Act' read with Section 174 of CGST Act, 2017.
(iv) Penalty under Section 77(1)(a), 77(1)(b), 77(1)(c), 77(1)(d) and 77(2) of Finance Act, 1994 read with Section 174 of CGST Act, 2017 should not be imposed upon them for their various acts of omission and commission as discussed above;
(v) the late fee / amount under Section 70 of Finance Act, 1994 read with Rule 7(C) of ibid and read with Section 174 of CGST Act, 2017 should not be imposed upon them for their various acts of omission and commissions discussed above;"
2.5 The said show cause notice was adjudicated as per the Order-in-Original dated 22.03.2024 referred in para-1 above. 2.6 Aggrieved appellant have filed appeal before Commissioner (Appeals) which has been dismissed as per the impugned order. 2.7 Aggrieved appellant have filed this appeal. 3.1 I have heard Ms Stuti Saggi, learned Counsel appearing for the appellant and Shri Santosh Kumar, Authorized Representative for the revenue.
4.1 I have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 Impugned order records the findings as follows:-
"5.3 After carefully going through the facts of the case on the basis of documents/records available on the case file. I proceed to decide the case on merit. The appellant is not registered with the service tax department. It was submitted that since they were engaged in supply of farm labour, supply of tube well operators for supply of water for production of agriculture produce and have also provided services by way of commission agent for sale or purchase of agriculture produce. In support the appellant have submitted the copy of Balance Sheet. Form 26AS, cash memo/receipt and affidavits of the persons who have made payment. I note that the Adjudicating Authority had Service Tax Appeal No.70835 of 2025 5 passed the impugned order after taking into cognizance of the same set of records. It was observed by the Adjudicating Authority that the details in the cash memo is not sufficient to establish that the appellant had provided farm labour or supplied tubewell operator etc. Besides, it was also noted that the demand pertains to the period 2016-17, however the affidavits have been produced signed by various persons during the year 2023. Thus, the inordinate time gap hints the afterthought theory. 5.5 I find force in the observation of the Adjudicating Authority in as much as the perusal of the cash memo/receipts reveal no concrete details regarding the nature of services. I also note that no explanation has been rendered by the appellant regarding the submission of the affidavits signed by various person during the year 2023 however the period of dispute pertains to the period 2016-17. Thus, the question raised by the Adjudicating Authority on the genuineness of the affidavit appears to be well founded. Besides no proper documents could be produced by the appellant which could establish that they have actually provided services pertaining to agriculture. Accordingly, in the absence of proper and adequate documentary evidence no relief could be extended to the appellant. Since the appellant have shown to have received the consideration against sale of service, hence in absence of proper documentary evidence, the same would be deemed to be taxable services and the consideration so received a taxable value in terms of section 65B(44) readwith 65B(51) of the Act.
5.6 Thus in view of the above I am of the considered opinion that the appellant have received Rs. 1360000/- against the sale of service. Since the specific category of service could not be established, hence the appellant would be deemed to have received consideration in lieu of taxable services provided as defined under section 65B(44) readwith 65B(51) of the Act, which states that w.e.f. all Service Tax Appeal No.70835 of 2025 6 services including declared services under section 66E but excluding those specified in negative list under section 66D of the Act, are leviable to service tax unless exempted by a notification issued under the Act.
5.7 Now while applying the above provisions to the facts of the instant case. I find that the appellant have provided taxable services during the period in question, If once it has been established by the department that the appellant has provided taxable services, the ones to prove that the consideration received is outside the purview of service tax entirely falls on the appellant. The appellant has failed to prove with the support of documentary evidences that the consideration received by him is exempted from service tax. I note that the case M/s Ideal Security v/s CCL Allahabad (2011 (23) STIL 66) the Hon'ble CESTAT Allahabad held that "We do agree with the Ll. Appellate Authority in the matter of the discrepancy noticed by him in respect of the considerations received und appearing in different manner in two different statutory documents. While the ST 3 return was statutory document under Finance Act, 1994, the balance-sheet and profit and loss account were statutory documents under Companies Act, 1936. Therefore, when the public documents bring the discrepancy, the onus of proof was on the assessee to come out with clean hand to prove its stand. When we did not find any merit on the part of appellant, we agree with Id. appellate authority that invoking Section 73 is appropriate. So far as the valuation aspect is concerned, whether the statutory dues which form part of gross value of the service shall be included or excluded is not a prescription of law. But the consideration that shall contribute to render the services shall essentially form part of the gross value of the taxable service." 6.0 In view of foregoing, I reject the appeal filed by the appellant and hold the impugned order to be legal and Service Tax Appeal No.70835 of 2025 7 proper. The appeal is accordingly disposed of in above terms."
4.3 I find that though the demand has been made by invoking the extended period of limitation, neither the impugned order nor the Order-in-Original records any findings in respect of the same.
4.4 Further the Order-in-Original records the findings as follows:-
"27. I observe that the main issue involved in this case is whether the demand of Service Tax in respect of the amounts declared by the party in information regarding TDS data F.Y. 2016-17 is sustainable or otherwise. In this regard, I have observed that as per TDS/ITR data received from Income Tax department, the party had provided taxable services valued at an amount of Rs.13,60,000/- during the Financial Years 2016-17. The replies submitted by the party is not sustainable as discussed in foregoing paras.
Therefore, on the basis of above facts, I hold that the demand of Service Tax amounting to Rs. 2,04,000/- including Education Cess, Secondary & Higher Education Cess and Swachh Bharat Cess which was not paid/short paid by the party for the financial year 2016-17 by suppressing their value of taxable services is recoverable from them under the provisions of Section 73(1) of the Finance Act, 1994.
28. As regards the payment of interest under the provisions of Section 75 of the Finance Act, 1994, I hold that when in the foregoing discussions, the liability to pay the Service Tax has been confirmed against the party, then, there can be no immunity from, payment of appropriate interest on such Service Tax liability. I notice that it is an inbuilt provision that in the event of failure of timely payment of the tax amount into the credit of the government exchequer, the same has to be paid alongwith the interest. This view is confirmed by the Hon'ble Service Tax Appeal No.70835 of 2025 8 Tribunal, Chennai in the case of INMA International Security Academy (P) Ltd. vs. CCE [2005] STR 31/2005 [(180) ELT107), wherein it has been held that "The question, now, it whether the party should be called upon to pay interest on Service Tax amount in terms of Section 75 of the Finance Act. 1994. The assessee's plea of ignorance does not appear to be appealing in as much as it is common man's knowledge that delayed payment of dues normally carry interest. The interest rightly charged in the case in terms of Section 75 ibid"
Therefore, in view of the settled law, the party is required to pay the interest at the applicable rate under the provision of Section 75 of the Finance Act, 1994 on the amount of Service Tax, which they have failed to pay on due date, till its actual date of payment. Therefore, I hold that the party is required to pay interest at the applicable rate under the provisions of Section 75 of the Finance Act, 1994 on the amount of Service Tax which they failed to pay at relevant time. 29. I observe that penalty under Section 78, Section 77(1)(a), Section 77(1)(c), Section 77(1)(d) and Section 77(2) of the Finance Act, 1994 has also been proposed against the party. After considering the facts discussed in the foregoing paras, I am of the view that-
The immunity from penalty can be granted, only if the party had not deliberately acted in defiance of law. In this case, the facts abundantly suggest that they did not furnish the information and produce documents as and when called by the department.
They also had not paid appropriate Service Tax liable thereon on the services provided by them during the relevant period, by deliberately withholding the crucial information, and did not disclose the material facts to the department, which is nothing but a willful attempt to suppress the facts with intent to evade payment of due Service Tax.
Service Tax Appeal No.70835 of 2025 9 It is a fact on record that the party was a registered assessee of the department, which clearly makes me to understand that the ignorance of law and procedure cannot be pleaded in this case to buy immunity from penal proceedings.
Even after the inquiry was initiated against them, the party did not bother to pay the unpaid due amount of Service Tax. These facts clearly confirm the party's intention to evade payment of Service Tax, and once, such intention gets proved, the presence of pre-requisite for imposition of penalty under Section 78 of the Finance Act, 1994 gets confirmed. This cannot be treated as mere ignorance on the part of them.
Hence, for this deliberate evasion of Service Tax by the party, as discussed hereinabove, penalties are imposable upon the party in the instant case. A simple reading of the provisions of Section 78 of the Finance Act, 1994 makes it abundantly clear that when the allegations of suppression of facts, willful mis-statement, fraud, collusion, etc., with intent to evade payment of duty are proved, then the defaulter shall also be liable to pay the penalty in addition to Service Tax and Interest. Thus, I hold that for this act, the party had rendered themselves liable to penal action under Section 78 of the Finance Act, 1994.
30. Further, it is evident from the facts of the case that the party failed to take the registration from the department as required under Section 69 of ibid read with Rule 4 of ibid. They did not furnish the information and produce documents called by the officer. They failed to deposit the appropriate Service Tax due within stipulated time limit, electronically, in a manner as provided under Rule 6 of Service Tax Rules, 1994. They contravened various provisions of Section 68 of the Finance Act, 1994. Thus, in view of their acts for violation of above-mentioned provisions of the Finance Act, 1994 and the Service Tax Rules, 1994, I hold that the party is liable for penal actions Service Tax Appeal No.70835 of 2025 10 under Sections 77(1)(a), 77(1)(c), Section 77(1)(d) and Section 77(2) of the Finance Act, 1994.
Since, it is on records that the party has violated the provisions of Section 70 of Finance Act, 1994 and Rule 7 of the Service Tax Rules, 1994, by not filing the correct statutory returns in relation to the service tax within the stipulated time period. Thus, I hold that they are liable for imposition of late fee/amount under Section 70 of Finance Act, 1994 read with Section 174 of CGST Act, 2017." 4.5 I observe that the appellant was engaged in providing Farm Labour. The Profit & Loss Account of the appellant for the year ending on 31.03.2017 duly certified by the Chartered Accountant is as reproduced below:
From the perusal of the above it is observed that the entire receipts against which the demand has been made is towards the supply of farm labour. This fact is also established from the cash memos against which the appellant have received these Service Tax Appeal No.70835 of 2025 11 amounts. On sample basis one of the cash memos is reproduced below:
4.6 I also observed that appellant have specifically taken a ground in respect of invocation of extended period of limitation before the adjudicating authority. However, no finding has been recorded or the same has been rejected without recording any reason. From perusal of the above I am inclined to agree with submissions made by the appellant that there were enough reasons for him to entertain a bonafide belief that no service tax Service Tax Appeal No.70835 of 2025 12 was payable on these services of supply of farm labour. As appellant entertained a bonafide belief that these services were exempt from payment of service tax, I do not find any reason for invoking the extended period of limitation for making this demand. Hon'ble Supreme Court in the case of Uniworth Textiles Ltd. [2013 (288) ELT 161 (SC)] has held as follows:-
"21. The Revenue contended that of the three categories, the conduct of the appellant falls under the case of "willful misstatement" and pointed to the use of the word "misutilizing" in the following statement found in the order of the Commissioner of Customs, Raipur in furtherance of its claim :
"The noticee procured 742.51 kl of furnace oil valued at Rs. 54,57,357/- without payment of customs duty by misutilizing the facility available to them under Notification No. 53/97-Cus., dated 3-6-1997"
22. We are not persuaded to agree that this observation by the Commissioner, unfounded on any material fact or evidence, points to a finding of collusion or suppression or misstatement. The use of the word "willful" introduces a mental element and hence, requires looking into the mind of the appellant by gauging its actions, which is an indication of one‟s state of mind. Black‟s Law Dictionary, Sixth Edition (pp 1599) defines "willful" in the following manner :-
"Willful. Proceeding from a conscious motion of the will; voluntary; knowingly; deliberate. Intending the result which actually comes to pass...
An act or omission is "willfully" done, if done voluntarily and intentionally and with the specific intent to do something the law forbids, or with the specific intent to fail to do something the law requires to be done..."
23. In the present case, from the evidence adduced by the appellant, one will draw an inference of bona fide Service Tax Appeal No.70835 of 2025 13 conduct in favour of the appellant. The appellant laboured under the very doubt which forms the basis of the issue before us and hence, decided to address it to the concerned authority, the Development Commissioner, thus, in a sense offering its activities to assessment. The Development Commissioner answered in favour of the appellant and in its reply, even quoted a letter by the Ministry of Commerce in favour of an exemption the appellant was seeking, which anybody would have found satisfactory. Only on receiving this satisfactory reply did the appellant decide to claim exemption. Even if one were to accept the argument that the Development Commissioner was perhaps not the most suitable repository of the answers to the queries that the appellant laboured under, it does not take away from the bona fide conduct of the appellant. It still reflects the fact that the appellant made efforts in pursuit of adherence to the law rather than its breach.
24. Further, we are not convinced with the finding of the Tribunal which placed the onus of providing evidence in support of bona fide conduct, by observing that "the appellants had not brought anything on record" to prove their claim of bona fide conduct, on the appellant. It is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar & Ors. - (2005) 8 SCC 760 that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility."
25. Moreover, this Court, through a catena of decisions, has held that the proviso to Section 28 of the Act finds application only when specific and explicit averments Service Tax Appeal No.70835 of 2025 14 challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Limited and Ors. (supra), this Court made the following observations :
"21. This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed :
„...Therefore, in order to attract the proviso to Section 11- A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act.‟ It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held :
Service Tax Appeal No.70835 of 2025 15 ...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11- A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso...." (Emphasis supplied)
26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant."
4.7 In the following decisions also it has been held that extended period of limitation could not have been invoked for making the demand when the person entertained a bonafide belief about non taxable nature or exempted nature of the services provided.
Anand Nishikawa Co. Ltd. Vs CCE, Meerut 2025 (188) ELT 149;
Infinity Infotech Parks Ltd. Vs UOI 2014 (36) STR 37; CCE, Chennai Vs Chennai Petroleum Corporation Ltd. 2007 (211) ELT 193;
Service Tax Appeal No.70835 of 2025 16 4.8 I observe that Hon'ble Supreme Court has in the case of Stemcyte India Therapeutics Pvt. Ltd [Order dated 14.07.2025 Civil Appeal Nos. 3816-3817 of 2025] observed as follows:
"9. In the present case, the disputed period is from 01.07.2012 to 16.02.2014. However, the show cause notice was issued only on 28.07.2017, demanding a sum of Rs.2,07,29,576/- towards service tax, by invoking the extended period of limitation. Under section 73(1) of the Finance Act, 1994, a show cause notice must ordinarily be issued within one year from the relevant date. The proviso to section 73(1) allows an extended period of up to five years only where the nonpayment or short payment of service tax is due to fraud, collusion, wilful misstatement, suppression of facts, or contravention of the provisions of the Act or Rules, with an intent to evade payment of service tax.
9.1. It is evident from the communication dated 02.12.2013 issued by the Deputy Commissioner of Central Excise, Ahmedabad-III, directing the appellant to furnish the documents relating to their activities, that the department was already aware of the nature of the appellant‟s operations as early as in 2013. Despite such awareness, the department issued the show cause notice after an inordinate delay, well beyond the ordinary period of limitation, and sought to justify it by invoking the extended period.
9.2 .........
9.3. It is a settled principle of law that, for the department to invoke the extended period of limitation, there must be an active and deliberate act on the part of the assessee to evade payment of tax. Mere non-payment of tax, without any element of intent or suppression, is not sufficient to attract the extended limitation period. In this regard, reference may be made to the following judgments:
(i) Padmini Products v. CCE [(1989) 4 SCC 275] Service Tax Appeal No.70835 of 2025 17 "12. Shri V. Lakshmi Kumaran, learned counsel for the appellant drew our attention to the observations of this Court in CCE v. Chemphar Drugs and Liniments, Hyderabad [(1989) 2 SCC 127 : 1989 SCC (Tax) 245] where at p. 131 of the report, this Court observed that in order to sustain an order of the Tribunal beyond a period of six months and up to a period of five years in view of the proviso to sub-
section (1) of Section 11-A of the Act, it had to be established that the duty of excise had not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. It was observed by this Court that something positive other than mere inaction or failure on the part of the manufacturer or producer of conscious or deliberate withholding of information when the manufacturer knew otherwise, is required to be established before it is saddled with any liability beyond the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal, however, had held contrary to the contention of the appellant. The Tribunal noted that dhoop sticks are different products from agarbatis even though they belonged to the same category and the Tribunal was of the view that these were to be treated differently. Therefore, the clarification given in the context of the agarbatis could not be applicable to dhoop sticks etc. and the Tribunal came to the conclusion that inasmuch as the appellant had manufactured the Service Tax Appeal No.70835 of 2025 18 goods without informing the central excise authorities and had been removing these without payment of duty, these would have to be taken to attract the mischief of the provisions of Rule 9(2) and the longer period of limitation was available. But the Tribunal reduced the penalty. Counsel for the appellant contended before us that in view of the trade notices which were referred to by the Tribunal, there is scope for believing that agarbatis were entitled to exemption and if that is so, then there is enough scope for believing that there was no need of taking out a licence under Rule 174 of the said Rules and also that there was no need of paying duty at the time of removal of dhoop sticks, etc. Counsel further submitted that in any event apart from the fact that no licence had been taken and for which no licence was required because the whole duty was exempt in view of Notification No.111 of 1978, referred to hereinbefore, and in view of the fact that there was scope for believing that it was exempt under Schedule annexed to the first notification i.e. No.55 of 1975, being handicrafts, the appellant could not be held to be guilty of the fact that excise duty had not been paid or short-levied or short-paid or erroneously refunded because of either any fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder. These ingredients postulate a positive act. Failure to pay duty or take out a licence is not necessarily due to fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act. Suppression of facts is not failure to disclose the legal consequences of a certain provision. Shri Ganguly, appearing for the Revenue, contended before us that the appellant should have taken out a Service Tax Appeal No.70835 of 2025 19 licence under Rule 174 of the said Rules because all the goods were not handicrafts and as such were not exempted under Notification No. 55 of 1975 and therefore, the appellant were obliged to take out a licence. The failure to take out the licence and thereafter to take the goods out of the factory gate without payment of duty was itself sufficient, according to Shri Ganguly, to infer that the appellant came within the mischief of Section 11-A of the Act. We are unable to accept this position canvassed on behalf of the Revenue. As mentioned hereinbefore, mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of the Act. In the facts and circumstances of this case, there were materials, as indicated to suggest that there was scope for confusion and the appellant believing that the goods came within the purview of the concept of handicrafts and as such were exempt. If there was scope for such a belief or opinion, then failure either to take out a licence or to pay duty on that behalf, when there was no contrary evidence that the producer or the manufacturer knew these were excisable or required to be licensed, would not attract the penal provisions of Section 11-A of the Act. If the facts are otherwise, then the position would be different. It is true that the Tribunal has come to a conclusion that there was failure in terms of Section 11-A of the Act. Section 35-L of the Act, inter alia, provides that an appeal shall lie to this Court from any order passed by the appellate tribunal relating, among other things, to the determination of any question having a relation to Service Tax Appeal No.70835 of 2025 20 the rate of duty of excise or to the value of goods for purpose of assessment. Therefore, in this appeal, we have to examine the correctness of the decision of the Tribunal. For the reasons indicated above, the Tribunal was in error in applying the provisions of Section 11-A of the Act. There were no materials from which it could be inferred or established that the duty of excise had not been levied or paid or short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of the Rules made thereunder. The Tribunal in the appellate order has, however, reduced the penalty to Rs 5000 and had also upheld the order of the confiscation of the goods. In view of the fact that the claim of the Revenue is not sustainable beyond a period of six months on the ground that these dhoop sticks, etc. were not handicrafts entitled to exemption, we set aside the order of the Tribunal and remand the matter to the Tribunal to modify the demand by confining it to the period of six months prior to issue of show-cause notice and pass consequential orders in the appeal on the question of penalty and confiscation. The appeal is allowed to the extent indicated above and the matter is, therefore, remanded to the Tribunal with the aforesaid directions. This appeal is disposed of accordingly."
(ii) CCE v. Chemphar Drugs and Liniments [(1989) 2 SCC 127] "7. The respondent filed an appeal before the Tribunal. The Tribunal considered the matter and noted that the appellant‟s case was that the demand for duty for the period beyond six months was time- barred; and the respondent‟s case was that the demand for the period beyond 6 months from the Service Tax Appeal No.70835 of 2025 21 receipt of show-cause notice, was time-barred inasmuch as there was no suppression or misstatement of facts by the appellant with a view to evade payment of duty. In support of its claim the respondent produced classification list approved by the authorities during the period 1978-79, and also produced extracts from the survey register showing that the officers had been visiting its factory from time to time and also taking note of the previous goods manufactured by the respondent. The plea of the Revenue was that there was suppression and/or mis-declaration and/or wrong information furnished in the declaration itself. The Tribunal noted the facts as follows:
"We observe it is not denied by the Revenue that the appellants had been submitting their classification lists from time to time showing the various products manufactured by them including those falling under T.I. 14-E and 68 also these containing alcohol. The officers who visited the factory as seen from the survey register at the factory also took note of the various products being manufactured by the appellants. It cannot be said that the appellants had held back any information in regard to the range and the nature of the goods manufactured by them. The appellants have maintained that the value of the exempted goods under T.I. 68 and also value of medicines containing alcohol, according to their interpretation, were not required to be included for the purpose of reckoning of the total excisable goods cleared by them. There is nothing on record to show that the appellants non-bonafidely held back information about the total value of the goods cleared by them with a Service Tax Appeal No.70835 of 2025 22 view to evade payment of duty. Their explanation that it was only on the basis of their interpretation that the value of the exempted goods were not required to be included that they did not include the value of the exempted goods which they manufactured at the relevant time and falling under T.I. 68 is acceptable in the facts of that case. The departmental authorities were in full knowledge of the facts about manufacture of all the goods manufactured by them when the declaration was filed by the appellants. That they did not include the value of the product other than those falling under T.I. 14-E manufactured by the appellants has to be taken to be within the knowledge of the authorities. They could have taken corrective action in time. We therefore find there was no warrant in invoking longer time-limit beyond six months available for raising the demand. So far as the demand for the period within six months reckoned from the date of receipt of the show-cause notice is concerned, we observe that the appellants‟ case is that value of the goods under T.I. 68 was not required to be included but the Revenue‟s plea is that only value of the specified goods under Notifications Nos. 71/78 and 80/80 was not required to be excluded."
8. On the aforesaid view the Tribunal came to the conclusion that the demand raised on this for a period beyond 6 months was not maintainable.
9. Aggrieved thereby, the Revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six Service Tax Appeal No.70835 of 2025 23 months and up to a period of 5 years in view of the proviso to sub-section (1) of Section 11-A of the Act, it has to be established that the duty of excise has not been levied or paid or shortlevied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before (sic beyond) the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The assessee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods which they manufactured at the relevant time. The Tribunal found that explanation was plausible, and also noted that the department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent. The respondent did not include the value of the product other than those falling under T.I. 14-E manufactured by the respondent and this was in the knowledge, according to the Tribunal, of the Service Tax Appeal No.70835 of 2025 24 authorities. These findings of the Tribunal have not been challenged before us or before the Tribunal itself as being based on no evidence."
(iii) Pushpam Pharmaceuticals Co. v. CCE [1995 Supp (3) SCC 462] "4. Section 11-A empowers the Department to reopen proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. Infact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression."
(iv) CCE v. Punjab Laminates (P) Ltd. [(2006) 7 SCC 431] "12. At no point of time, the Revenue doubted the correctness or otherwise of the manufacturing process or the ingredients disclosed by the respondent. The stand of the respondent that the industry as such had adopted the same Service Tax Appeal No.70835 of 2025 25 manufacturing process and had been extended the benefit of the exemption notification of 1989 has not been called in question. If the stand of the manufacturer is correct, there was no reason as to why it should be singled out.
13. This Court decided Bakelite Hylam Ltd. [(1997) 10 SCC 350] on 10-3-1997. The impugned notice was issued only on 9-12-1997 evidently relying on or on the basis thereof.
14. It is not a case where the respondents had not disclosed the activities of manufacturing products carried out by them by declaration or otherwise. They responded to each and every query of the appellant, as and when called upon to do so. The authorities of the appellant must have verified the said disclosures. At least they are expected to do so. The disclosure made by the respondent was acceptable to them. Their bona fides were never questioned.
15. The applicability of the extended period of limitation is, therefore, required to be considered in the aforementioned context. The proviso, it is trite, provides for an exception. It is not the rule. A case, therefore, has to be made out for attracting the same.
16. In Primella Sanitary Products (P) Ltd. v. CCE [(2005) 10 SCC 644 : (2005) 184 ELT 117] a three- Judge Bench of this Court was dealing with a case where a concession was made by a counsel appearing on behalf of the Revenue. The Court opined that although the item was put under the right classification list but they had not been permitted to take a different stand stating: (SCC p. 648, para 13) "As the matter of classification has proceeded on a matter of concession of facts we do not Service Tax Appeal No.70835 of 2025 26 allow the appellants to withdraw from that concession. They are now not permitted to argue on the question of classification."
17. In Pahwa Chemicals (P) Ltd. v. CCE [(2005) 189 ELT 257] this Court held:
"The appellants have all along claimed that merely because they were affixing the label of a foreign party, they did not lose the benefit of Notification No. 175/86-CE as amended by Notification No. 1/93-CE The view taken by the appellants had, in some cases, been approved by the Tribunal which had held that mere use of the name of a foreign party did not disentitle a party from getting benefit of the notifications. It is only after larger Bench held in Namtech Systems Ltd. v. CCE [(2000) 115 ELT 238 (cegat)] that the position has become clear. It is settled law that mere failure to declare does not amount to wilful misdeclaration or wilful suppression.
There must be some positive act on the part of the party to establish either wilful mis-declaration or wilful suppression. When all facts are before the Department and a party in the belief that affixing of a label makes no difference does not make a declaration, then there would be no wilful mis- declaration or wilful suppression. If the Department felt that the party was not entitled to the benefit of the notification, it was for the Department to immediately take up the contention that the benefit of the notification was lost."
18. Keeping in view the peculiar facts and circumstances of this case, we are of the opinion that it is not a fit case where this Court should interfere. The appeal is, therefore, dismissed. The parties shall, however, pay and bear their own costs."
9.4. Therefore, in the absence of fraud, collusion, wilful misstatement, or suppression of facts with an intent to Service Tax Appeal No.70835 of 2025 27 evade payment of service tax, the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994 is wholly unwarranted. Mere non- payment of service tax, by itself, does not justify the invocation of the extended limitation period. Accordingly, the show cause notice issued by the department is clearly time-barred. On this ground alone, the impugned order deserves to be set aside."
4.8 In view of the above, I find that demand made by invoking extended period of cannot be upheld. The impugned order is set aside.
5.1 Appeal is allowed.
(Dictated and pronounced in open court) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp