CESTAT Allahabad Rules Extended Limitation Invalid Where Department Had Already Audited Assessee

Background and Procedural History

The dispute in SRJ EDU Services Pvt. Ltd. Vs Commissioner of Central Goods & Services Tax came before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, through an appeal against Order-in-Appeal No.GZB/EXCUS/000/APPL/MRT/12/2025-26 dated 30.06.2025, passed by the Commissioner (Appeals), CGST Meerut.

The litigation had an unusually layered procedural trajectory:

1. Original Show Cause Notices (SCNs)

   • SRJ EDU Services Pvt. Ltd. was a registered assessee under the erstwhile Service Tax regime, providing services covered under Section 65B(44) of the Finance Act, 1994.
   • The assessee held three independent Service Tax registration numbers:
     • AAACR6837PSD005
     • AAACR6837PSD001
     • AAACR6837PSD003
   • Relying on data received from the Income Tax Department for FY 2016-17, the Department noticed a mismatch between the income reported in the assessee’s Income Tax Return (ITR) and the turnover reflected in ST-3 returns.
   • Based on this alleged discrepancy, three SCNs were issued in October 2021, all invoking the extended limitation under the proviso to Section 73(1) of the Finance Act, 1994. These SCNs proposed:
     • Demand of service tax on the differential income,
     • Interest under Section 75,
     • Penalties under Sections 77 and 78, and
     • Late fees under Section 70.

2. Orders-in-Original on Initial SCNs
   Each SCN was adjudicated separately in October 2023, and the adjudicating authority confirmed demands, interest, penalties, and late fees as under:

   • SCN No. 07/2021 dated 18.10.2021 – Order-in-Original dated 23.10.2023
   • SCN No. 102/2021-22 dated 20.10.2021 – Order-in-Original dated 20.10.2023
   • SCN No. 06/2021 dated 18.10.2021 – Order-in-Original dated 19.10.2023

   In all three matters, the Department proceeded on the footing that the differential between ITR and ST-3 represented undeclared taxable services.

3. First Appeal and Initial Remand

   • The assessee filed appeals before the Commissioner (Appeals), contending inter alia that the demands were time-barred, that the amounts included non-taxable/ exempt activities (such as pre-school education), and that centralised registration had already been granted.
   • Vide Order-in-Appeal No.GZB-EXCUS-000-APPL-MRT-224-226 dated 27.03.2024, the Commissioner (Appeals) did not decide the matter finally but remanded the case to the adjudicating authority for fresh consideration, particularly on the aspect of centralised registration and its implications for the three individual registrations.

4. Remand Proceedings and Dropping of Demands

   • Pursuant to the remand, the adjudicating authority passed Order-in-Original No.35/GST/AC/D-III/GZB/T.P./S.Tax/2024-25 dated 10.07.2024, wherein all three demands were dropped in entirety.
   • A key plank of this order was that the extended period of limitation could not be invoked, because:
     • The assessee had already undergone departmental audit for the period April 2014 to June 2017.
     • The audit team had verified ITRs, ST-3 returns, balance sheet, ledgers, invoices and other primary records.
     • For the same broad period, the Department had already issued a separate SCN dated 30.08.2019, which was adjudicated on 14.08.2020.
     • Once the factual position was within the knowledge of the Department and had already been subject to audit and adjudication, a fresh SCN invoking extended limitation on the same set of facts was impermissible.
   • The adjudicating authority relied on precedents including Nizam Sugar Factory vs Collector of Central Excise, A.P., 2006 (197) E.L.T. 465 (S.C.), and also noted that multiple SCNs covering the same period could not co-exist, as there cannot be two parallel assessments for a single period.

5. Departmental Appeal Before Commissioner (Appeals)

   • The Revenue challenged the remand Order-in-Original primarily contending that:
     • The authority had not properly examined the two allegedly inactive registrations (AAACR6837PSD001 and AAACR6837PSD003).
     • The authority had accepted the assessee’s chartered accountant certificate and reconciliation for education services of Rs. 2,17,49,800/- without verifying the underlying financial records or proof of exemption.
     • The Order-in-Original was a non-speaking and unreasoned order.