CESTAT Chennai Sets Aside Service Tax Demands Against Indian Bank On Limitation Ground

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, granted relief to Indian Bank and held that where transactions are duly recorded in statutory books, and there is no evidence of suppression or intent to evade tax, the larger period of limitation cannot be invoked.

The ruling was delivered by a Bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao while allowing appeals filed by Indian Bank against service tax demands raised on various issues including turnover commission, arrangement charges, foreign exchange income, CENVAT credit reversals, and credit availment.

The dispute arose from several show-cause notices issued to the bank alleging short payment or non-payment of service tax on foreign exchange income earned through interbank transactions, turnover commission, arrangement fees, short reversal of CENVAT credit, handling charges, and alleged excess availment of credit on BSNL-related services.

Indian Bank argued that all transactions were duly recorded in its statutory books and were regularly examined during audit.

It further submitted that, being a public sector bank functioning under the supervision of the Government and the Reserve Bank of India, there was no suppression of facts or deliberate attempt to evade tax.

The Tribunal accepted the bank's contention and observed that there was no material on record showing deliberate concealment or misstatement.

It noted that all transactions had been disclosed in the books of accounts and merely taking a different view on taxability could not amount to suppression.

"Perhaps some of the issues also involve interpretation and hence, there cannot be any scope to allege suppression of facts with an intent to evade tax and hence, invocation of extended period of limitation cannot stand", it observed.

The bench held that when there is no intent to evade tax, invocation of the extended limitation period cannot be sustained.

"Revenue is not justified in invoking the extended period of limitation. In view of this alone, it is clearly to our mind that the demands raised invoking the larger period cannot sustain and, therefore, same are set aside", stated the bench.

Since the entire demand had been raised by invoking the larger period and the same was found to be unsustainable, the Tribunal set aside the impugned order and allowed Indian Bank's appeals with consequential relief.

The Department's appeals were also dismissed.

For Appellant: Shri G. Shiva Kumar, Advocate and Shri S. Dinesh Kumar, Chartered Accountant

For Respondent: Shri M. Selvakumar, Authorized Representative