The Gauhati High Court, in a detailed judgment, has quashed a service tax demand and penalty imposed on a transporter for the period 2014-15 to 2017-18, holding that the invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994 was invalid in the absence of specific findings of willful suppression, fraud, or similar grounds. The Court emphasized that the revenue authorities must strictly adhere to the statutory preconditions before assuming jurisdiction to extend the limitation period for service tax recovery.
The petitioner, engaged in the business of transportation of goods by road, was served with a show cause notice alleging suppression of taxable value and non-payment of service tax. The demand was based primarily on data from Form 26AS obtained from the Income Tax Department, which reflected receipts for services rendered. The authorities proceeded to confirm the demand, impose interest, and levy penalties, invoking the extended limitation period on the ground of willful suppression.
The petitioner challenged the proceedings, arguing that the services provided were expressly excluded from the service tax net under Section 66D of the Finance Act, 1994 (negative list), as the petitioner was not a goods transport agency or courier agency but operated in his individual capacity. It was contended that the entire receipts were from exempted services, and the authorities had failed to analyze the nature of services before raising the demand. The petitioner further argued that the extended limitation could only be invoked upon a clear finding of fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax, none of which were established in the impugned order.
The Court, after reviewing the statutory framework and relevant Supreme Court precedents, reiterated that the extended period of limitation under Section 73(1) is an exception and can only be invoked upon fulfillment of specific statutory conditions. The Court found that the adjudicating authority had not recorded any conclusive finding of willful suppression or intent to evade tax, and had relied solely on the non-furnishing of documents and inferences drawn from Form 26AS, without examining whether the services were indeed taxable. The Court held that such an approach amounted to an assumption of jurisdiction not vested by law and was therefore unauthorized.
On the issue of maintainability of the writ petition despite the availability of alternative statutory remedies, the Court held that where the assumption of jurisdiction itself is contrary to law or where there is a violation of natural justice, the High Court is empowered to exercise its writ jurisdiction under Article 226 of the Constitution. The Court cited several Supreme Court decisions affirming that the existence of an alternative remedy is not an absolute bar to the exercise of writ jurisdiction, especially in cases involving jurisdictional errors or patent illegality.
Accordingly, the Gauhati High Court set aside the impugned show cause notice and order-in-original, quashing the demand, penalty, and interest imposed on the petitioner. The Court clarified that the revenue authorities must record specific findings of willful suppression or similar grounds before invoking the extended limitation period, and that tax liability cannot be imposed merely on the basis of inferences from income tax data without a proper analysis of the nature of services rendered. The writ petition was allowed, with no order as to costs.
Case Reported at:
Case Name: Sri Samujjal Phukan v. Union of India and Ors.
Case Citation: (2026) taxcode.in 899 HC
