Legal principle

To invoke the extended period of limitation, the Revenue must prove deliberate suppression of facts with intent to evade tax — a burden equally applicable to cognate provisions such as Section 28A of the Customs Act — and mere omission or failure to pay without such intention does not suffice, nor can penalty be imposed where bona fide belief and prompt payment show reasonable cause.

Court decision

The appeal was allowed in favour of the appellant (Bharat Hotels). The court held the extended limitation period under the proviso to Section 73(1) could not be invoked, so the SCN (issued 24.10.2008) was barred by limitation for Mandap Keeper services for 2004-2006 and for Management, Maintenance and Repair services for 2005-2007. The appellant was, however, held liable to pay service tax for 2007-08 on Management, Maintenance and Repair services, and no penalty could be imposed on it.

Facts

Bharat Hotels Limited, a five-star hotel chain, was investigated by the DGCEI (enquiry initiated 11.03.2005, initially into franchisee fees paid to Inter-Continental Hotels, USA, and later expanded) for non-payment of service tax on Mandap Keeper services (2004-06) and Management, Maintenance and Repair services (2005-08). The appellant paid ₹1,84,01,238 with interest during the enquiry itself. A Show Cause Notice dated 24.10.2008 invoked the five-year extended period under the proviso to Section 73(1) of the Finance Act, 1994, demanding ₹1,96,44,277 under Section 73 read with Section 68 and Rule 6, interest under Section 75, and penalties under Sections 76, 77 and 78. The Commissioner confirmed a demand of ₹1,68,31,739, and CESTAT upheld liability on the two services while dropping demands on franchisee, club membership and exhibition services.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 11A, Customs Act, 1962 — Definitions
• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods
• Section 28A, Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice