The Patna High Court recently delivered a significant judgment, ruling that mere non-registration under the service tax regime does not amount to fraud or suppression of facts that could justify invoking the extended five-year limitation period under the Finance Act, 1994.

The Division Bench, consisting of Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey, quashed the service tax demand raised against Anil Kumar Singh, a government contractor from Bihar. The Court observed,

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"The plea of the respondent that the petitioner had not taken registration of the service tax would alone not be a reason to believe that he has committed a fraud or has wilfully suppressed his liability to pay the tax."

Anil Kumar Singh had filed a writ petition challenging the demand-cum-show cause notice and the confirming order issued by the Assistant Commissioner, CGST & CX, Purnea Division. It was alleged that he had defaulted on paying ₹3,05,794 as service tax for the financial year 2016–17. This amount was based on royalty deductions made from his bills.

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The Court noted that Singh’s construction and maintenance work was exempted under the Mega Exemption Notification No. 25/2012, dated 20.06.2012. "We have noticed that in this case, the petitioner is a Government Contractor and the services availed by him have been found exempted under the Mega Exemption Notification," the Court said, highlighting that no service tax was leviable for his activities.

The Court emphasized the importance of compliance with Rule 4A of the Service Tax Rules, 1994, which mandates issuing an invoice, bill, or challan for taxable services.

"The Challan has to contain the name, address of the registration number of such person and name and address of the person receiving taxable service, along with the description and value of taxable service and the tax payable thereon," the Court noted.

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However, in this case, the respondent authorities had admittedly not issued any invoice or bill for the deducted royalty, which would have informed the petitioner about his tax liability.

The Assistant Commissioner had invoked the extended limitation period, claiming fraud and suppression of facts. However, the Court found that there was no evidence of a deliberate act by the petitioner to evade service tax. Citing the Supreme Court’s ruling in Pushpam Pharmaceuticals Company v. Collector of Central Excise, the Court reiterated that "mere omission is not suppression; the act must be deliberate."

Furthermore, the Court underlined that the absence of a proper invoice created confusion and prevented Singh from being aware of his tax obligations. This procedural lapse by the government department weakened the case for invoking the extended limitation period.

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In conclusion, the Patna High Court ruled that the show cause notice and the order confirming the demand were barred by limitation and hence quashed both. "In the opinion of this Court, it is not one of those cases in which the petitioner may be said to have committed fraud or acted with an intention to evade service tax," the judgment stated.

The writ petition filed by Anil Kumar Singh was accordingly allowed.

Case Title: Anil Kumar Singh v. The Union of India and Others