- 1 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF FEBRUARY, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND CENTRAL EXCISE APPEAL No. 46 OF 2025 BETWEEN: 1. COMMISSIONER OF CENTRAL EXCISE AND CENTRAL TAX, MANGALORE CGST COMMISSIONERATE, 7TH FLOOR, TRADE CENTRE, BUNTS' HOSTEL ROAD, MANGALORE- 575 003. …APPELLANT (BY SRI M. UNNIKRISHNAN, ADVOCATE) AND: 1. M/S YOJAKA INDIA PRIVATE LIMITED, 3-28/43, ABCO TRADE CENTRE, 2ND FLOOR, KOTTARA CHOWKI, MANGALORE - 575 006, REP. BY ITS MANAGING DIRECTOR. …RESPONDENT (BY SMT. M.R. VANAJA, ADVOCATE) THIS CEA IS FILED UNDER SECTION 35G OF CENTRAL EXCISE ACT, 1944, PRAYING TO SET ASIDE THE IMPUGNED FINAL ORDER No.FO/ST/A20387/2025-ST(DB) DATED 17.03.2025 PASSED BY THE CESTAT REGIONAL BENCH, BENGALURU IN THE INTEREST OF JUSTICE AND EQUITY. Digitally signed by VINUTHA B S Location: High Court of Karnataka - 2 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 THIS APPEAL, COMING ON FOR ORDERS THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K. V. ARAVIND) Heard Sri.M. Unnikrishnan, learned counsel for the petitioner and Smt. M.R. Vanaja, learned counsel for the respondent. 2. This appeal by the Revenue under Section 35G of the Central Excise Act, 1944 (for short, “the Act”) is directed against the order dated 17.03.2025 passed in Service Tax Appeal No.2309/2011 by the Customs, Excise and Service Tax Appellate Tribunal, Bangalore (for short, “the Tribunal”). 3. The following substantial questions of law are raised for consideration of this Court. ” (i) In the facts and circumstances of the case, whether the order of the Hon'ble Tribunal (CESTAT) in setting aside the demands with interest and penalties without due consideration of relevant material facts and reasons mentioned in the order in original is perverse, illegal and liable to be set aside? - 3 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 (ii) Whether the Hon'ble Tribunal (CESTAT), Bangalore Bench, is justified in setting aside the demand without going into merits and merely on the point of limitation simply following the decisions of Hon'ble High Court of Andhra Pradesh in the case of Central Excise Appeal No. 24 of 2017, decided on 13- 3-2017." 4. The brief facts of the case are that the respondent is a holder of service tax registration and was providing services under the categories of “Commercial or Industrial Construction”, “Supply of Tangible Goods Services”, “Manpower Recruitment and Supply of Services” and “Works Contract Services”. 4.1 It is the case of the Revenue that the respondent– service provider had wrongly availed CENVAT credit on input supplies. It is further alleged that the service provider had collected the applicable service tax from its clients but failed to remit the same to the Government account. It is stated that, prior to the issuance of the show cause notice, the taxes in question were paid. A show cause notice under Section 73 of the Finance Act, 1994 came to be issued. The respondent contended that, as the taxes had been paid before the issuance - 4 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 of the show cause notice, no such notice could have been issued in view of sub-section (3) of Section 73 of the Finance Act, 1994. 4.2 Thereafter, the Commissioner of Central Excise and Service Tax issued a show cause notice dated 19.04.2011 proposing to levy and recover tax, interest and penalty. The respondent filed a reply to the said notice. The Commissioner passed an Order-in-Original dated 06.05.2011 holding that penalty under Section 78 of the Finance Act, 1994 could not be levied, as the noticee had made payment of tax along with interest prior to the issuance of the show cause notice, thereby attracting the protection under Section 73(3) of the Act. 4.3 Aggrieved by the said order, the Revenue preferred an appeal before the Tribunal. The Tribunal, by the impugned order, following the judgment of the High Court of Andhra Pradesh in Commissioner of Central Excise, Visakhapatnam v. Tirupathi Fuels Pvt. Ltd., reported in 2017 (7) G.S.T.L. 142 (A.P.), dismissed the Revenue’s appeal. - 5 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 5. Sri M. Unnikrishnan, learned Standing Counsel appearing for the appellant–Revenue, submits that the tax and interest were paid much prior to the issuance of the show cause notice. He contends that where the taxes are paid before the issuance of a show cause notice, certain protection is extended under sub-section (3) of Section 73 of the Act. 5.1 Learned counsel further submits that, in view of sub-section (4) of Section 73, the benefit under sub-section (3) would not be available in cases where the non-payment of service tax is by reason of fraud, collusion, wilful misstatement, suppression of facts, or contravention of any of the provisions of Chapter V of the Finance Act, 1994. 5.2 It is his submission that, in the present case, the payment of tax was not voluntary, but was made only upon detection during the exercise carried out by the authorities. Therefore, according to him, the respondent is not entitled to the protection contemplated under sub-section (3) of Section 73 of the Act. - 6 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 6. Per contra, Smt. M.R. Vanaja, learned counsel appearing for the respondent, supporting the impugned order, submits that there is no allegation in terms of sub-section (4) of Section 73 of the Act so as to exclude the benefit available under sub-section (3) of Section 73. Learned counsel further submits that the finding recorded by the Tribunal is based on a proper consideration of the show cause notice as well as the Order-in-Original, and does not warrant interference by this Court. 7. We have considered the submissions of learned counsel for the parties and perused the appeal papers. 8. Section 73 of the Act provides for recovery of service tax not levied or paid, short-levied or short-paid, or erroneously refunded. Sub-section (1) of Section 73 stipulates that a notice shall be served on the person chargeable with service tax within a period of thirty months from the relevant date. 8.1 However, the proviso to sub-section (1) extends the period of limitation to five years where the service tax has not - 7 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 been levied or paid, or has been short-levied or short-paid, or erroneously refunded, by reason of: a) fraud; b) collusion; c) wilful misstatement; d) suppression of facts; or e) contravention of any of the provisions of Chapter V of the Act or the rules made thereunder, with intent to evade payment of service tax. 8.2 Sub-section (3) of Section 73 enables a person chargeable with service tax to pay the amount of service tax not levied or paid, short-levied or short-paid, or erroneously refunded, either on the basis of his own ascertainment or on the basis of the tax ascertained by the Central Excise Officer, before the service of notice under sub-section (1). Upon such payment and on furnishing the prescribed intimation to the Central Excise Officer, no notice under sub-section (1) shall be served in respect of the amount so paid. 8.3 In the present case, it is not in dispute that the service tax was paid prior to the issuance of the show cause notice. The contention of the Revenue, however, is that sub- - 8 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 section (4) operates as an exception to sub-section (3). According to the Revenue, the benefit under sub-section (3) would not be available where the non-levy or non-payment, short-levy or short-payment, or erroneous refund of service tax is by reason of: a) fraud; b) collusion; c) wilful misstatement; d) suppression of facts; or e) contravention of any of the provisions of Chapter V of the Act or the rules made thereunder with intent to evade payment of service tax. 8.4 We find that the circumstances contemplated in clauses (a) to (e) above not only extend the period of limitation but also operate to deny the benefit available under sub-section (3) of Section 73 of the Act. The limitation prescribed under sub-section (1) of Section 73 pertains to the service of notice. Once a show cause notice is issued de hors the protection available under sub-section (3), the invocation of sub-section (4) so as to exclude the benefit under sub-section (3) must be specifically pleaded and substantiated. The existence of any of - 9 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 the circumstances enumerated in clauses (a) to (e) is required to be clearly demonstrated. 8.5 Invocation of sub-section (4), which results both in the extension of limitation and in the denial of the statutory protection under sub-section (3), warrants strict compliance with the statutory requirements. 8.6 During the course of hearing, we called upon the learned counsel for the Revenue to demonstrate the existence of the circumstances falling under clauses (a) to (e) in the show cause notice. Though learned counsel took us through the contents of the show cause notice, we do not find any specific allegation referable to clauses (a) to (e) as enumerated in sub-section (4) of Section 73 of the Act. 8.7 In the absence of the Revenue establishing the existence of any of the circumstances contemplated in clauses (a) to (e) of sub-section (4), the benefit available under sub- section (3) of Section 73 cannot be denied to the respondent. A similar view has been taken by the High Court of Andhra Pradesh in Tirupathi Fuels Pvt. Ltd. (supra), which has been - 10 - HC-KAR NC: 2026:KHC:10539-DB CEA No. 46 of 2025 rightly followed by the Tribunal. We find that the view taken in the Order-in-Original and concurred with by the Tribunal in the impugned order does not warrant any interference by this Court. 9. For the reasons stated above, we are of the considered view that no substantial question of law arises from the order passed by the Tribunal. Accordingly, the appeal, being devoid of merit, stands dismissed. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE VBS List No.: 1 Sl No.: 6