Extended Limitation Can’t Be Invoked After Departmental Audit: CESTAT

The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a remand order passed by the Commissioner (Appeals), holding that the extended period of limitation under Section 73 of the Finance Act, 1994 cannot be invoked once the assessee has been audited and the department was already in possession of all material facts. The bench of Sanjiv Srivastava (Technical Member), held that the foundation of the demand itself was legally unsustainable, as the extended period of limitation had been wrongly invoked. The appellant had been subjected to departmental audit, and an audit report had categorically stated “Other Observations: Nil”. A separate show cause notice issued in August 2019 pursuant to audit was already adjudicated, establishing that the department was fully aware of the appellant’s activities. Once facts are within the knowledge of the department, allegations of suppression cannot be sustained. The adjudicating authority’s finding that extended limitation was not invocable was not challenged by the revenue before the Commissioner (Appeals), and therefore had attained finality. The appellant was registered with the Service Tax Department and held three service tax registrations, including a centralized registration. Based on third-party information received from the Income Tax Department, the department alleged a mismatch between income disclosed in the Income Tax Return (ITR) and the figures reported in ST-3 returns for FY 2016–17. Consequently, three separate show cause notices were issued in October 2021, proposing service tax demands aggregating over ₹1.2 crore, along with interest, penalties, and late fees, by invoking the extended period of limitation on grounds of suppression of facts. These notices were adjudicated individually in October 2023, confirming the demands with penalties under Sections 77 and 78 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) in March 2024 remanded the matters to the adjudicating authority, directing re-examination of facts, particularly in relation to centralized registration and the alleged inactive service tax registrations. In remand proceedings, the adjudicating authority, by order dated 10 July 2024, dropped all demands, holding that the department had already conducted a comprehensive audit covering the relevant period. All records including ITRs, ST-3 returns, balance sheets, ledgers, and invoices had been examined. No discrepancy regarding mismatch of turnover had been pointed out during the audit. Invocation of the extended period was impermissible in light of settled law. The department challenged the dropping of demands before the Commissioner (Appeals), who partly allowed the appeal and remanded the matter again, holding that the adjudicating authority failed to verify documentary evidence regarding exemption claimed on pre-school education services. Reliance on Chartered Accountant certificates without corroboration was improper. The order was non-speaking and required fresh examination. This remand order was challenged by the assessee before CESTAT. CESTAT reiterated that the audit is not a fishing expedition and that the department cannot issue subsequent show cause notices invoking extended limitation on the same set of facts already examined. Holding the remand order to be legally unsustainable, the Tribunal set it aside and allowed the appeal, conclusively dropping the service tax demands for FY 2016–17. The accompanying miscellaneous application was also disposed of. Case Details Case Title: M/s SRJ EDU Services Pvt. Ltd. Versus Commissioner of Central Goods & Services Tax, Ghaziabad Case No.: Service Tax Miscellaneous Application No.70375 of 2025 Date: 15/01/2026 Counsel For Appellant: R.S. Sharma, Advocate Counsel For Respondent: Chitra Srivastava, Authorised Representative Click Here To Read Order Read More: Postal Exports Get Major Boost as Government Aligns Them with Cargo Shipments

Extended Limitation Can’t Be Invoked After Departmental Audit: CESTAT

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