Introduction
In a landmark decision dated 13 December 2023, the Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) reaffirmed that extended limitation periods under Section 73(1) of the Finance Act cannot be triggered merely due to suppression of facts. Instead, a deliberate intent to evade tax is essential. This ruling, stemming from the appeals of M/s International Air Charter and M/s Wellworth Project Developers, clarifies tax-assessment boundaries and offers important guidance to businesses.
🔍 What Is the Extended Limitation Period?
Under Section 73(1), tax authorities typically have one year from the date of return filing to issue demands. However, they can extend this to five years if they prove suppression of facts or intentional evasion.
Key provision highlights:
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The extension applies only where there is “suppression of facts”.
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CESTAT insists that suppression must be deliberate, accompanied by intent to evade tax
🚩 CESTAT’s Landmark Cases
1. International Air Charter Vs. Commissioner of Central Tax
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The appellant, providing non-scheduled aircraft services, believed their operations fell under “air transport of passengers,” not “supply of tangible goods.”
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A show-cause notice (SCN) dated 23 October 2013 invoked the extended limitation.
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The appellant rebutted, stating they honestly filed returns believing their position was defensible.
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CESTAT held that mere suppression isn't enough — there must be deliberate intent to evade
2. Wellworth Project Developers Pvt. Ltd.
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Engaged in construction services and had taken credits and abatement under reverse-charge mechanisms.
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A 2019 SCN demanded Rs. 2.24 crore, invoking the five-year period.
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CESTAT determined:
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No evidence of intentional suppression.
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Self-assessment or omission in returns alone cannot justify extended periods .
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🧩 Legal Foundation Behind the Rulings
Supreme Court Precedents
CESTAT’s decision draws from these precedents:
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Pushpam Pharmaceuticals vs. Collector of Central Excise (1995): Clarified suppression of facts implies fraud, collusion, or wilful default.
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Anand Nishikawa Co. Ltd. vs. Commissioner: Reinforces that suppression must be deliberate and evasive .
Key CESTAT Observations
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Statutory reading: The term “suppression” must have intentionally wrongful intent.
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Burden of proof: Authorities must show conscious omission aimed at avoiding tax.
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No blanket rule: Omissions or discrepancies in self-assessed returns are insufficient .
📊 At-a-Glance Comparison
| Aspect | Accepted by CESTAT | Rejected |
|---|---|---|
| Extended 5-year limit | Yes, if deliberate suppression | No, mere omission or wrong filing |
| Proof needed | Intent to evade tax | Simply incorrect or self-assessed returns |
| Burden of proof | On tax authorities | Not on the assessee |
| SCN content requirement | Must allege deliberate suppression | No proof of intent |
✅ Practical Implications for Businesses
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Maintain clear documentation: Record ALTERNATE interpretations of tax liability and support them with legal opinions or legal precedents.
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**Stay
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