No mala fide intent on the part of People Receiving Comission From Adarsh Credit Co-operative Society to evade the payment of service tax: CESTAT

No mala fide intent on the part of the appellants to evade the payment of service tax: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal, New Delhi, ruled that there was no mala fide intent on the part of the appellants to evade the payment of service tax.


The appellants were receiving commission from M/s. Adarsh Credit Co-operative Society Ltd. for providing various services including that of ‘Consultants’. A specific intelligence was gathered by the Officers of DGGI, Jaipur Zonal Unit about appellants to have received commission from M/s. ACCSL in lieu of providing “Business Auxiliary Services” being provided to M/s. ACCSL. But the service tax was not being paid by the appellants on the amount of the said commission received. 


Mr. Bipin Garg, Ms. Kainaat and Ms. Shalini, Counsels appearing for the appellant, submitted that there was much of confusion about the nature of the services being provided by the appellants as far as the taxability thereof was confirmed.

They submitted that the Larger Bench of the Tribunal in the case of M/s. Pagariya Auto Center Vs. Commissioner of C.ExAurangabad, had set aside the said confusion by a Final Order that the services as the one in question are the taxable services and the provider of ‘Business Auxiliary Services’ is liable to pay the duty.

It was contended that despite the said decision, the confusion continued due to which the appellants were under bona fide belief that the service tax is not applicable on the services provided by them.

Mr. Mahesh Bhardwaj, authorized representative for the department, impressed upon that the appellants had never taken the service tax registration despite the ‘Business Auxiliary Services’ have been made taxable w.e.f. 01.07.2012 for the sole reason that these services are not covered under negative list of Section 66B of Service Tax Act (Finance Act, 2012).


The single member bench of Dr. Rachna Gupta (Judicial), observed that show cause notices in all these appeals had been issued invoking the extended period of limitation.

The tribunal noted that section 73(1) of the Finance Act, 1994 deals with the recovery of service tax not levied or not paid or short levied or short paid or erroneously refunded. According to which the recovery may be called for by the Central Excise Officer within the period of 30 months.

It was observed by the tribunal that no doubt in view of Pagariya Auto Center, the larger Bench decision, the services in question were held to be taxable. Otherwise also the services of commission agents are not covered under the negative list under Section 66D of the Service Tax Act.

The bench stated that mens rea/the intent to evade the tax liability is the core for invoking the extended period over the normal period.

It was noted by the bench that there is no denial to the fact that appellants have not charged service tax from M/s. ACCSL. There is also no denial to the fact that the entire amount of commission was shown by the appellants in their income tax returns and the tax liability under direct taxes was duly discharged by the appellants.

On the above perusal and undisputed facts the tribunal held that there was no mala fide intent on the part of the appellants to evade the payment of service tax. They rather were under bona fide belief.

The bench held that since there was the scope and belief with the appellants for entertaining the doubt about no liability of theirs to pay the service tax that the application of Section 73(1) of the Finance Act, 1994 the proviso thereof gets ruled out and resultantly, the extended period of limitation is held to have wrongly invoked by the department.

The tribunal allowed 5 of the appeals with respect to demands pertaining to the extended period of respective show cause notice.

Case title: Dinesh Chandra Dubey v/s Commissioner of Central Goods & Service Tax, Excise and Customs, Udaipur

Citation: Service Tax Appeal No. 51585 of 2019 [SM]

Click here to read the Order/Judgment 

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