Extended Limitation Cannot Be Invoked Mere on Audit Objections: CESTAT

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the extended period of limitation cannot be invoked merely on the basis of audit objections in the absence of suppression, fraud or wilful misstatement by the assessee. The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that no service tax was payable on exhibition-related expenses incurred for an event held in Switzerland and that software licence sales subjected to VAT could not simultaneously be subjected to service tax. The appeal arose from an Order-in-Appeal dated 30.08.2019 passed by the Commissioner (Appeals), CGST, Gurugram. The appellant, Quadlabs Technologies Pvt. Ltd., is engaged in providing Information Technology Software Services and was subjected to departmental audit for the period 2012-13 to 2014-15. Following the audit conducted in February 2018, the department issued a show cause notice invoking the extended period of limitation and alleging non-payment of service tax on certain transactions. The adjudicating authority had confirmed demands of over Rs.44 lakh along with interest and penalties. Subsequently, the Commissioner (Appeals) partly allowed the appeal but upheld two major demands — service tax of Rs.40,020 on exhibition expenses incurred for an event in Geneva, Switzerland, and service tax of Rs.32.52 lakh on sale of software licences to customers. Before the Tribunal, the assessee argued that the Geneva exhibition was conducted outside taxable territory and therefore outside the scope of service tax under Rule 6 of the Place of Provision of Services Rules, 2012. The company contended that Rule 6 specifically provides that services relating to events are deemed to be provided at the place where the event is actually held. Since the event took place in Switzerland, the levy of service tax was not sustainable. On the software licence issue, the assessee submitted that it was primarily engaged in development and sale of standardised software products for the travel industry. The Tribunal noted that under the End User Licence Agreements (EULA), customers were granted perpetual rights to use the software and VAT had already been discharged treating the transaction as sale of goods. Separate service tax had also been paid on support services wherever applicable under separate service-level agreements. The assessee relied on several judicial precedents including the Supreme Court judgment in Tata Consultancy Services v. State of Andhra Pradesh and the Madras High Court decision in Infotech Software Dealers Association v. Union of Indiato argue that packaged software sold with perpetual rights constituted sale of goods and could not be subjected to dual taxation under both VAT and service tax. The Tribunal accepted the submissions of the assessee and held that the department had failed to establish any ingredients necessary for invoking the extended limitation period under Section 73(1) of the Finance Act, 1994. It observed that the appellant had fully cooperated during audit proceedings, disclosed all transactions in its books of account and acted under a bona fide belief regarding taxability. The Bench further observed that audit-based detection alone does not establish suppression or intent to evade tax. Relying upon earlier precedents including Uniworth Textiles and Sand Hotel Pvt. Ltd., the Tribunal reiterated that mere non-payment of tax cannot automatically amount to fraud, collusion or wilful suppression. The burden of proving mala fide intent lies on the department. The Tribunal categorically held that no service tax was leviable on exhibition expenses incurred for an event conducted in Switzerland because the place of provision of service was outside India. It also held that Rule 3 of the Place of Provision Rules, being a default provision, could not override the specific rule applicable to event-related services. The Tribunal held that the dominant nature of the transaction was sale of software on which VAT had already been paid. Since the assessee had separately discharged service tax on service components wherever applicable, the department could not levy service tax again on the software sale itself. The Bench also referred to judicial precedents holding that an entity cannot be subjected to both VAT and service tax on the same transaction. The CESTAT allowed the appeal both on merits and on limitation and set aside the impugned service tax demands. Case Details Case Title: M/s Quadlabs Technologies Pvt Ltd Versus Commissioner of Central Excise, Goods & Service Tax, Gurugram Citation: JURISHOUR-1246-HC-2026(Ker) Case No.: Service Tax Appeal No. 61369 of 2019 Date: 12.05.2026 Counsel For Appellant: D.S. Nagi, Advocate Counsel For Respondent: Amita Gupta, Authorized Representative Click Here To Read Order Read More: Alleged Filing Of ITR Using Accused’s Mobile Numbers, Email IDs Requires Investigation: Madras HC Refuses To Quash Rs. 700 Crore Property Fraud FIR

Extended Limitation Cannot Be Invoked Mere on Audit Objections: CESTAT

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