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Issues:
Demand of service tax under "Real Estate Agency" service for the period from January 1999 to December 2003, including out-of-pocket expenses and foreign currency collection from a foreign company. Grounds of limitation raised by the appellant in response to the show cause notice. Analysis: Issue 1: Demand of service tax under "Real Estate Agency" service The appeal primarily contested the demand of service tax amounting to Rs. 9,77,666 under the "Real Estate Agency" service for the period from January 1999 to December 2003. The dispute centered around the inclusion of out-of-pocket expenses, such as travelling and hotel expenses, in the taxable value of the service for service tax payment. The Revenue argued that these expenses, reimbursed by the service recipients, should be included in the taxable value. Additionally, the demand was also related to a certain amount collected in foreign currency from a foreign company, which the Revenue contended was for services rendered within India. The appellant, however, claimed that the service was exempt from tax due to specific exemption notifications. The Department highlighted that the foreign exchange was accounted for when there was no exemption from service tax. Issue 2: Grounds of limitation The appellant raised the plea of limitation in response to the show cause notice issued on 14-6-2005, which was based on an audit note from February 2004. The appellant argued that they were led to believe that service tax was not payable on out-of-pocket expenses based on various circulars and notifications. They referred to specific instructions and letters from the Ministry and Directorate of Service Tax to support their contention. The appellant maintained that they had bona fide doubts regarding their tax liability, which should have been considered in invoking the extended period of limitation for recovery of service tax. The Revenue, however, contended that the plea of limitation should be rejected, citing that the material information was not disclosed by the appellant. Judgment: The Tribunal found merit in the appellant's argument regarding limitation. They noted that the appellant had entertained bona fide doubts about their tax liability, supported by circulars and notifications available during the disputed period. The Tribunal held that the original authority should have provided better reasons for invoking the extended period of limitation. It was observed that the appellate authority did not consider the appellant's plea based on the circulars and notifications. Ultimately, the Tribunal decided to set aside the demand of service tax on the grounds of limitation, allowing the appeal solely on this basis. This comprehensive analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's decision based on the grounds of limitation and the appellant's bona fide belief regarding tax liability.
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