By Puloma Dalal, Jayesh Gogri, Mandar Telang; Chartered Accountants
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Demand cannot be raised by invoking extended period when EA-2000 audit is already conducted by the department and no objections were raised in the audit report on a particular point, in respect of which appropriate disclosure is contained in financial statements.
Facts
During the period July 2003 to March 2007, Appellant earned commission income and provided infrastructural support services but did not pay service tax on it. The Revenue alleged that such receipts were liable to service tax under “business support services”/”business auxiliary services”. Appellant challenged the adjudication order by contending that the demand is barred by limitation as no point regarding taxability of commission was raised by the audit party of the department during EA-2000 audit conducted for period July 2001 to March 2006. Appellant’s contention was rebutted by the department by submitting that the mandate for the audit party of the Commissionerate was very limited and audit party was not required to look into entire records in detail to conclude that all angles are covered.
Held
The Tribunal held that the commission received by the assessee from the financial institutions and the insurance companies would be taxable pursuant to decision of Larger Bench in the case of Pagariya Auto Centre vs. CCE [2014] 44 GST 23/42 taxmann.com 371 (Mum). However, as regards the question of limitation, the Hon’ble Tribunal observed that Audit Party conducted detailed audit of the records of the assessee on various days and except for one small amount of interest not paid on the incentives, no objections were raised in the Audit report. It therefore held that the Revenue authorities were aware of the amount received as commission by the Appellant and recorded in the balance sheet. Tribunal further stated that, is a common knowledge that the EA-2000 audit is an extensive audit of the records of the assessee. Accordingly, relying upon the ratio laid down by Hon’ble Karnataka High Court in case of CCE vs. MTR Foods Ltd. 2012 (282) ELT 196 the Tribunal held that since no objection was raised regarding particular issue during the audit of records, the demand raised by issuing extended period is barred by limitation.
