{"id":9758,"date":"2026-06-24T16:19:43","date_gmt":"2026-06-24T10:49:43","guid":{"rendered":"https:\/\/www.centaxonline.com\/blog\/?p=9758"},"modified":"2026-06-24T16:19:43","modified_gmt":"2026-06-24T10:49:43","slug":"extended-limitation-and-section-78-penalty-invalid-without-wilful-suppression-cestat","status":"publish","type":"post","link":"https:\/\/www.centaxonline.com\/blog\/extended-limitation-and-section-78-penalty-invalid-without-wilful-suppression-cestat","title":{"rendered":"Extended Limitation and Section 78 Penalty Invalid Without Wilful Suppression | CESTAT"},"content":{"rendered":"<pre><strong>Case Details: <a href=\"https:\/\/www.centaxonline.com\/latest-news-updates\/excise-service-tax\/101010000000421382\/extended-period-demand-and-section-78-penalty-unsustainable-without-proof-of-wilful-misstatement-cestat\">Tuticorin Sri Subramanya Swami Mahamai Paribalana Sangam vs. Commissioner of GST &amp; Central Excise, Madurai (2026) 43 Centax 131 (Tri.-Mad)<\/a><\/strong><\/pre>\n<h2><em>Judiciary and Counsel Details<\/em><\/h2>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><strong>S\/Shri Ajayan T.V.<\/strong>, Member (J) &amp; <strong>M. Ajit Kumar<\/strong>, Member (T)<\/li>\n<li><strong>Shri R. Swaranavel<\/strong>, Adv., for the Appellant.<\/li>\n<li><strong>Smt. Anandalakshmi Ganeshram<\/strong>, Authorised Representative, for the Respondent.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><em>Facts of the Case<\/em><\/h2>\n<p>The assessee-society had rented out shops on a commercial basis, but neither obtained service tax registration nor discharged service tax liability on the rental income. A show cause notice (SCN) was issued, invoking the extended period of limitation for a part of the demand, followed by another SCN for the subsequent period. The adjudicating authority confirmed the service tax demand along with interest and imposed a penalty under Section 78 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) allowed the exclusion of municipal taxes from the taxable value but upheld the penalty, noting that the assessee had admitted its liability and made part-payments. Aggrieved by the invocation of the extended period and imposition of penalty, the assessee filed an appeal before the CESTAT.<\/p>\n<h2><em>CESTAT Held<\/em><\/h2>\n<p>The CESTAT held that the penalty under Section 78 of the Finance Act, 1994, is imposable only where non-payment or short-payment of service tax is attributable to fraud, collusion, wilful misstatement, suppression of facts, or deliberate intent to evade payment of tax. The Tribunal observed that mere non-payment of service tax does not, by itself, establish intent to evade tax and that the SCNs did not contain any specific allegation of wilful misstatement or suppression of facts. It further held that detection of non-payment during a preventive visit, in the absence of corroborative evidence, was insufficient to establish wilfulness or intent to evade tax. Accordingly, the penalty imposed under Section 78 was set aside. Since the conditions for invoking the extended period are identical to those required for imposing penalty under Section 78, the demand beyond the normal period was also held to be unsustainable. The matter was remanded to the adjudicating authority for examination of the claimed exemption and applicable circular, and for re-quantification of the demand after allowing exclusion of municipal taxes and the benefit of cum-tax valuation.<\/p>\n<h2><em>List of Cases Cited<\/em><\/h2>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2010%20(17)%20S.T.R.%20258%20(Tri.%20Bang.)&amp;itemType=AP\">Dakshina Kannada Mogaveera Mahajana Sangha<\/a> \u2014 2010 (17) S.T.R. 258 (Tri. Bang.) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2006%20(199)%20E.L.T.%20509%20(Tri.-Bom)&amp;itemType=AP\">Ispat Industries Ltd. v. Commissioner<\/a> \u2014 2006 (199) E.L.T. 509 (Tri.-Bom) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2002%20(146)%20E.L.T.%20481%20(S.C.)&amp;itemType=AP\">Jaiprakash Industries Ltd.<\/a> \u2014 2002 (146) E.L.T. 481 (S.C.) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2013%20(288)%20E.L.T.%20161%20(S.C.)&amp;itemType=AP\">Uniworth Textiles Ltd. v. Commissioner<\/a> \u2014 2013 (288) E.L.T. 161 (S.C.) \u2014 Relied on [Paras 3.1, 14]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2009%20(14)%20S.T.R.%20129%20(Tri.-Ahmd)&amp;itemType=AP\">Steelcast Ltd. v. Commissioner<\/a> \u2014 2009 (14) S.T.R. 129 (Tri.-Ahmd) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2011%20(21)%20S.T.R.%20500%20(Guj.)&amp;itemType=AP\">Commissioner v. Steel Cast Ltd.<\/a> \u2014 2011 (21) S.T.R. 500 (Guj.) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2003%20(161)%20E.L.T.%20346%20(Tri.-Del)&amp;itemType=AP\">Hindalco Industries Ltd. v. Commissioner<\/a> \u2014 2003 (161) E.L.T. 346 (Tri.-Del) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2011%20(24)%20S.T.R.%20461%20(Tri.-Del)&amp;itemType=AP\">Subhash Khandelwal &amp; Sons v. Commissioner<\/a> \u2014 2011 (24) S.T.R. 461 (Tri.-Del) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2005%20(189)%20E.L.T.%20257%20(S.C.)&amp;itemType=AP\">Pahwa Chemicals Pvt. Ltd. v. Commissioner<\/a> \u2014 2005 (189) E.L.T. 257 (S.C.) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2006%20(197)%20E.L.T.%20465%20(S.C.)&amp;itemType=AP\">Nizam Sugar Factory v Commissioner<\/a> \u2014 2006 (197) E.L.T. 465 (S.C.) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2008%20(10)%20S.T.R.%20449%20(Tri.%20-%20Kolkata)&amp;itemType=AP\">Commissioner v. Advantage Media Consultant<\/a> \u2014 2008 (10) S.T.R. 449 (Kolkata &#8211; CESTAT) \u2014 Relied on [Paras 3.1, 12]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2013%20(29)%20S.T.R.%20352%20(Guj.)&amp;itemType=AP\">Ankleshwar Taluka ONGC Land Loosers Travelles Co. Op. v. Commissioner<\/a> \u2014 2013 (29) S.T.R. 352 (Guj.) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2017%20(5)%20G.S.T.L.%20408%20(Tri.-Bom)&amp;itemType=AP\">Noble Hospital &amp; Research Centre v. Commissioner<\/a> \u2014 2017 (5) G.S.T.L. 408 (Tri.-Bom) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2017%20(5)%20G.S.T.L.%20266%20(Tri.-Del)&amp;itemType=AP\">Jumera Promotors &amp; Developers Pvt. Ltd. v Commissioner<\/a> \u2014 2017 (5) G.S.T.L. 266 (Tri.-Del) \u2014 Referred [Para 3.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2017%20(4)%20G.S.T.L.%2057%20(Tri.-Bom)&amp;itemType=AP\">Raghuvir Motors Agencies Pvt. Ltd. v. Commissioner<\/a> \u2014 2017 (4) G.S.T.L. 57 (Tri.-Bom) \u2014 Referred [Para 3.1]<\/li>\n<li>Trojan &amp; Co. v. R.M.N.N. Nagappa Chettiar \u2014 AIR 1953 SC 235 \u2014 Relied on [Para 5.1]<\/li>\n<li>Chittoori Subbanna v. Kudappa Subbanna \u2014 AIR 1965 SC 1325 \u2014 Noted [Para 5.3]<\/li>\n<li>Ramakant Ambalal Choksi v. Harish Ambalal Choksi \u2014 2024 INSC 913 \u2014 Applied [Para 5.4]<\/li>\n<li>Noharlal Verma v. Distt. Coop. Central Bank Ltd. \u2014 (2008) 14 SCC 445 \u2014 Relied on [Para 6.1]<\/li>\n<li>State Bank of India v. B.S. Agricultural Industries \u2014 AIR 2009 SUPREME COURT 2210 \u2014 Noted [Para 6.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2004%20(172)%20E.L.T.%203%20(S.C.)&amp;itemType=AP\">Commissioner v. B.V. Jewels<\/a> \u2014 2004 (172) E.L.T. 3 (S.C.) \u2014 Noted [Para 6.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2014%20(35)%20S.T.R.%20177%20(All.)&amp;itemType=AP\">Commissioner v. Monsanto Manufacturer Pvt. Ltd.<\/a> \u2014 2014 (35) S.T.R. 177 (All.) \u2014 Noted [Para 6.1]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2016%20(44)%20S.T.R.%20409%20(Mad.)&amp;itemType=AP\">E.T.A. General Pvt. Ltd. v. Additional Commissioner<\/a> \u2014 2016 (44) S.T.R. 409 (Mad.) \u2014 Noted [Para 6.1]<\/li>\n<li>Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubli \u2014 (1970) 1 SCR 51 \u2014 Noted [Para 7]<\/li>\n<li>Nityananda M. Joshi v. Life Insurance Corporation of India \u2014 (1970) 1 SCR 396 \u2014 Noted [Para 7]<\/li>\n<li>Sushila Devi v. Ramanandan Prasad \u2014 (1976) 2 SCR 845 \u2014 Noted [Para 7]<\/li>\n<li>Mirza Iqbal Hussain v. State of U.P. \u2014 AIR 1983 SC 60 \u2014 Noted [Para 7]<\/li>\n<li>Kiran Singh v. Chaman Paswan \u2014 AIR 1954 SC 340 \u2014 Noted [Para 8]<\/li>\n<li>Chief Justice of Andhra Pradesh and Another v. L.V.A. Dikshitulu \u2014 AIR 1979 SC 193 \u2014 Noted [Para 8]<\/li>\n<li>Sushil Kumar Mehta v. Govind Ram Bohra \u2014 (1990) 1 SCC 193 \u2014 Noted [Para 8]<\/li>\n<li>MD Army Welfare Housing Organisation v. Sumangal Services (P.) Ltd. \u2014 (2004) 8 SCC 619 \u2014 Noted [Para 8]<\/li>\n<li><a href=\"https:\/\/www.centaxonline.com\/search?searchData=2003%20(152)%20E.L.T.%2039%20(S.C.)&amp;itemType=AP\">Easland Combines, Coimbatore v. Collector<\/a> \u2014 2003 (152) E.L.T. 39 (S.C.) \u2014 Relied on [Para 14]<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><em>List of Departmental Clarification Cited<\/em><\/h2>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>C.B.E. &amp; C Circular No. 200\/10\/2016-Service Tax, dated: 6-9-2016 [Para 15]<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><em>List of Notifications Cited<\/em><\/h2>\n<ul>\n<li>Notification No. 24\/2007-ST, dated: 22-5-2007 [Paras 2, 3.2, 15]<\/li>\n<li>Notification No. 29\/2012-ST, dated: 20-6-2012 [Paras 2, 3.2, 15]<\/li>\n<li>Notification No. 25\/2012-Service Tax, dated: 20-6-2012 [Paras 3.1, 15]<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Case Details: Tuticorin Sri Subramanya Swami Mahamai Paribalana Sangam vs. Commissioner of&hellip;<\/p>\n","protected":false},"author":19,"featured_media":9774,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49,51,63],"tags":[],"class_list":["post-9758","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-excise-service-tax","category-news-excise-service-tax","category-est-case-chronicles"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Extended Limitation and Section 78 Penalty Invalid Without Wilful Suppression | CESTAT<\/title>\n<meta name=\"description\" content=\"CESTAT held that extended limitation and Section 78 penalty cannot apply without proof of wilful misstatement, suppression or tax evasion.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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