1. Heard both sides.
2. The facts of the case are that the State Bank of India, (Leather and International Branch), Kilpauk, Chennai, is providing both taxable and exempted service. As such, under Rule 6(3)(c) of the Cenvat Credit Rules, 2004, they were entitled to utilize cenvat credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on output services, since they were not maintaining separate accounts. During the month of February, 2005, they were required to pay service tax amounting to Rs. 6,56,651/-. As such, they were entitled to utilize cenvat credit amounting to Rs. 1,31,096/- only whereas, in contravention of the rules they have utilized cenvat credit amounting to Rs. 2,62,426/-. It is the allegation of the department that the said branch of the SBI did not disclose to the department that they are providing exempted output service also and that they have taken service tax in excess of the admissible 20% amount. This was only detected when the accounts of the SBI were audited by the departmental audit officers. As such, the impugned show cause notice has been issued invoking the extended period of time limit. The impugned order in original upholds the demand apart from levying interest and penalty on the respondents. The lower appellate authority has held that the demand was time barred, leading to this appeal by the department.
3. The Ld. SDR, Shri A.B. Niranjan Babu, arguing the case for the department states that this is a clear case of contravention of Service Tax Law with intent to evade payment of service tax and hence the longer period of limitation has been rightly invoked. He states that the finding of the lower appellate authority that the department is very well aware of the fact that SBI is collecting service tax on behalf of the Government, has no connection with invoking longer period of limitation. He supports the grounds of appeal advanced in the Review Order passed by the Committee of Commissioners.
4. Shri N.S. Sivakumar, CA, appearing for the respondents states that the SBI has no intention to evade service tax. He explains that the Head Office of the SBI issued an internal Circular asking the branches to utilize cenvat credit for the period October, 2004 to February, 2005, and accordingly, the branch has taken credit keeping in view 20% of the tax payable for the months of October,2004 to February, 2005, since they have not been maintaining separate accounts. He however, states that he does not have a copy of the said circular. He cites the decision of the Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals Co. Vs. Collector of Central Excise, Bombay - 1995 (78) ELT 401 (SC), which holds that the act of the assessees must be deliberate to invoke longer period of limitation. He supports the impugned order passed by the lower appellate authority.
5. After hearing both sides, I find that the law relating to limitation in the context of service tax has been well spelt out under Section 73 of the Finance Act, 1994. It provides that longer period of limitation can be invoked if service tax has not been paid by reason of “(a) fraud; or (b) collusion; or (c) willful mis-statement; or (d) suppression of fact; or (e) contravention of any of the provisions of this Chapter or of the rules made there-under with intent to evade payment of service tax.” Under the self-assessment procedure, the SBI was required to determine the correct amount of tax itself and pay the same. This is a case where the jurisdictional officer has not been intimated by the concerned branch of the SBI that it is providing both taxable and exempted service or that it has availed credit exceeding 20% of the tax amount. The Ld. CA states that no option has been given by the concerned branch of the SBI not to maintain separate accounts in respect of taxable services and exempted services. No declaration to this effect has also been made in the ST-3 returns filed by the respondents. The provisions of the Rule restricting utilization of credit to the extent of 20% of the tax payable is a very clear cut provision and the concerned branch of the SBI was required to follow the same more so when they are claiming to be service tax collectors. As such, several ingredients required for the purpose of invoking longer period of limitation is available in this case such as mis-statement, suppression as well as contravention of the provision with intent to evade payment of correct amount of tax coupled with wrong utilization of credit leading to short payment of tax. The pleas that the SBI has issued an internal circular, (a copy of which is not made available), that the SBI is a Govt. Bank, that it is collecting service tax for the department etc., are extraneous to determine limitation under Section 73 of the Finance Act, 1994. On the other hand, the SBI should be a model tax payer and to prove their bonafies, they should have promptly paid up the small amount of tax not paid by it once the audit pointed it out, which I find they have not done. But for the detection by audit the tax-evasion by SBI would have gone undetected.
6. In view of the foregoing, I find force in the submissions made on behalf of the department that the longer period of limitation is invokable in this case. Accordingly, I set aside the impugned order. However, as the lower appellate authority has not gone into the merits of the case, in view of his finding on time bar, the appeal is remanded to him for fresh decision as regards the merits of the case. The department’s appeal is allowed in the above terms.