2011 (9) TMI 269 - AT - Service Tax

Photography service - inclusion of value of paper, chemicals and other materials - M/s. Agrawal Colour Photo Industries vs. Commissioner (2011 (8) TMI 291 - CESTAT, NEW DELHI (LB)). It stands held in the said decision of the Larger Bench that the value of services in relation to photography would be the gross amount charged including the cost of goods and material used and consumed in the course of such services Extended period of limitation - suppression of facts - Held that - since the earlier decisions of the Tribunal were in favour of the assessee, it has to be held that there was bonafide doubt about the inclusion of the cost of material in the cost of services - no malafide can be attributable to the appellant so as to invoke the extended period of limitation. - demand beyond the normal period of limitation dropped Penalty - held that - while re-quantifying the demand falling within the period of limitation, no penalty is required to be imposed on the appellants inasmuch as we have already held that there is no malafide on the part of the assessee - Appeal disposed off.

Summary

Issues:
1. Whether the value of paper, chemicals, and packing materials used by the respondents should be added to the value of services provided for levying service tax.
2. Whether the demand raised by the Revenue invoking the extended period of limitation is valid.
3. Whether there was a bonafide belief on the part of the respondents regarding the inclusion of material cost in the value of services.
4. Whether the demand beyond the period of limitation is time-barred and if any penalty is required to be imposed.

Analysis:

Issue 1:
The dispute centered around whether the value of materials used by the respondents in providing photography services should be included in the gross amount charged from clients for levying service tax. The Commissioner (Appeals) ruled in favor of the respondents, citing precedent decisions. However, a Larger Bench decision established that the value of services in photography includes the cost of goods and materials used.

Issue 2:
The demand raised by the Revenue was based on the extended period of limitation. The Government circular and earlier Tribunal decisions favored the assessee, indicating a bonafide belief regarding the non-inclusion of material costs in the value of services. The Tribunal found that the extended period of limitation could not be invoked due to the bonafide doubt and lack of malafide intent on the part of the respondents.

Issue 3:
In a similar case, it was held that notices issued beyond the limitation period would not stand due to the bonafide belief held by the assessee during the relevant period. Consequently, the demand beyond the limitation period was deemed time-barred, and no penalty was imposed. The matter was remanded for recalculating the duty demand within the limitation period, considering the credit of duty/tax paid on raw materials.

Conclusion:
The appeals were disposed of with the finding that the demand beyond the limitation period was time-barred, and no penalty was warranted due to the bonafide belief held by the respondents. The case was remanded for recalculating the duty demand within the limitation period, with consideration given to the credit of duty/tax paid on raw materials.