Penalty Can't Be Levied When Extended Limitation Period Is Not Invokable: Chandigarh CESTAT

In a recent decision, the Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that when the extended period of limitation is not applicable, penalty under Section 78 of the Finance Act, 1994 cannot be levied. The case involved M/s P S Construction versus the Commissioner, concerning alleged non-payment of service tax under the Composition Scheme. \r

The tribunal noted that without the invocation of the extended period, the demand for service tax for the normal limitation period could not be sustained for certain transactions. Despite an amendment in 2013, the tribunal held it was not applicable retroactively to the case in question. The bench emphasized that the penalty under Section 78 requires specific conditions like fraud or suppression of facts, which were not substantiated in this instance. \r

Consequently, the tribunal set aside the penalty imposed, citing insufficient investigation and unsubstantiated allegations in the show cause notice.