Extended Limitation Cannot Apply Without Evidence: High Court

The petitioner, being a proprietorship concern, received a notice under Section 70A(3)(a) of the Finance Act, 1994, dated 11.04.2022, relating to the period from 2014-15 to June 2017, seeking payment of service tax. Thereafter, an order dated April 24, 2024, adjudged that there is a failure to pay the service tax. The petitioner filed objections against the notice as well as the adjudication order, stating that both these actions were barred due to the expiration of time, considering that the period of five years had been wrongfully invoked without any justification.

Central Issue: Whether a show cause notice issued beyond the normal limitation under Section 73 can be sustained without evidence of fraud, suppression, or intent to evade tax?

HC’s Ruling: The court decided in favour of the petitioners and declared the application of the extended period under the five-year rule to be illegal. The Court pointed out that there was no evidence from the department that would show that fraud, misrepresentation, or concealment of information had taken place in an attempt to evade payment of taxes. Vague and general statements were not enough to support the extension of the period.

Further, the Court stated that the show cause notice issued in April 2022 would have been outside the five-year period even when viewed liberally. This rendered the proceedings void ab initio. The court rejected the objection of alternative remedies being available and ruled that a writ petition is valid against ex facie actions without jurisdiction.

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