Simplified Explanation of the Judgment

In a recent judgment, the Patna High Court ruled against a travel agency that challenged a service tax demand and penalty issued by the Central Goods and Services Tax (CGST) authorities. The travel agency had received a demand-cum-show cause notice in October 2020, alleging unpaid service tax for the financial years 2015–16 and 2016–17, amounting to over ₹25 lakhs, along with interest and penalties.

The agency claimed it had only earned commission from ticket bookings and was not liable to pay tax on the total value of sales. It further argued that the demand was issued beyond the one-year limitation period as per the Finance Act, 1994, and therefore was time-barred.

The court examined two major issues:

1. Whether the extended limitation period of five years could be invoked in this case.
2. Whether the adjudication order confirming the tax demand was passed within a reasonable time.

The petitioner argued that there was no willful suppression of facts or intent to evade tax, which are necessary to invoke the extended limitation. Relying on multiple judgments, the petitioner also contended that the delay in adjudication made the order invalid.

The CGST department, on the other hand, maintained that the petitioner had failed to cooperate during the investigation and had not submitted any relevant documents despite repeated requests. The department stated that the petitioner had even abandoned the registered business premises, and the notice had to be served based on the income tax records.

The department also pointed out that the petitioner gave inconsistent responses—initially denying any connection with the travel business and later claiming to run it under a different name. Moreover, the delay in adjudication was partly due to the COVID-19 pandemic, which created exceptional circumstances.

The court upheld the demand, finding that the conduct of the petitioner amounted to suppression of facts. Since the petitioner failed to disclose key information and had surrendered the service tax registration earlier, the extended limitation was validly invoked. The court also held that the adjudicating authority had acted within a reasonable time, especially considering pandemic-related delays.

While the petitioner raised valid concerns about the tax being wrongly calculated on the gross value rather than the commission, the court did not examine these contentions in detail. Instead, it directed the petitioner to file an appeal before the appropriate authority where these factual matters could be reviewed.

Significance or Implication of the Judgment

This ruling is crucial for businesses and professionals operating in the service sector, especially those with inconsistent tax compliance records. The judgment reinforces that:

• Extended limitation periods can be applied when taxpayers fail to cooperate or conceal material facts.
• Taxpayers must respond to notices and maintain transparency, or they risk losing procedural protections.
• Delays in adjudication due to extraordinary circumstances like the COVID-19 pandemic may not invalidate proceedings.
  The judgment also serves as a reminder that high courts will not intervene in factual disputes if a statutory appeal mechanism exists. Instead, parties are expected to exhaust alternate remedies before approaching the writ jurisdiction.

Legal Issue(s) Decided and the Court’s Decision with Reasoning

• Whether the extended limitation period of five years under Section 73(1) of the Finance Act, 1994 can be invoked?
  • Yes. The court held that the petitioner had suppressed material facts and did not cooperate during the investigation. This justified invoking the extended limitation.
• Whether the adjudication order passed after more than three years was time-barred under Section 73(4B)?
  • No. The court ruled that Section 73(4B) does not impose an absolute time limit but only requires “reasonable effort” to decide within one year. The delay due to COVID-19 was considered valid.
• Whether the petitioner had an alternate remedy?
  • Yes. The petitioner was directed to approach the appellate authority under Section 85 of the Finance Act, 1994.

Judgments Referred by Parties

• M/S Kanak Automobiles Pvt. Ltd. v. Union of India, CWJC No. 18398 of 2023
• Union of India v. Rajasthan Spinning and Weaving Mills, (2009) 13 SCC 448
• M/S Power Spectrum v. Union of India, CWJC No. 16772 of 2024
• Circular Letter dated 13.12.2023, F. No. CBIC-20004/3/2023-GST

Judgments Relied Upon or Cited by Court

• M/S Usha Rectifiers Corporation India Ltd. v. CCE, 2011 (263) ELT 655 (SC)
• CCE, Surat-I v. Neminath Fabrics Pvt. Ltd., 2010 (256) ELT 369 (Guj)
• M/S Fiat India Pvt. Ltd., Civil Appeal No. 1648-49 of 2004
• Ramnath Prasad v. Principal Commissioner of CGST & CX, CWJC No. 10644 of 2024
• Continental Foundation Joint Venture Holding v. CCE, (2007) 10 SCC 337
• Cosmic Dye Chemical v. CCE, (1995) 6 SCC 117

Case Title
Siddartha Travels v. Principal Commissioner of CGST & Central Excise & Ors.

Case Number
CWJC No. 13297 of 2024

Coram and Names of Judges
Hon’ble Mr. Justice Rajeev Ranjan Prasad
Hon’ble Mr. Justice Ashok Kumar Pandey

Names of Advocates and who they appeared for

• For the Petitioner:
  Mr. D.V. Pathy, Sr. Advocate
  Mr. Sadashiv Tiwari, Advocate
  Mr. Hiresh Karan, Advocate
  Ms. Shivani Dewalla, Advocate
  Ms. Prachi Pallavi, Advocate
• For the Respondents:
  Mr. Additional Solicitor General
  Mr. Anshuman Singh, Sr. Standing Counsel

Link to Judgment
6a109ad2-2193-47c4-8f26-7ff815baec06.pdf

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