2012 (5) TMI 422 - AT - Service Tax

Extended period of limitation - appellant surrendered their service tax registration as their taxable services are below Rs.4 lakhs - it was found that the appellant had wrongly availed the benefit of Notification 6/2005 and claimed exemption thereunder Held that - in the case of Needwise Advertising (P.) Ltd. (2010 (11) TMI 211 (Tri)) that interpretation of surrender as revealing deliberate intention not to pay service tax is not sustainable as surrender of registration to be taken as made on belief of non-requirement of such registration. Therefore, onus is on revenue to find out the cause of surrendering registration if action is not taken at the same time, the same cannot be questioned subsequently. Therefore extended period is not invocable. matter is sent back to the adjudicating authority to requantify the demand

Summary

Issues:
Service tax demand confirmation, applicability of Notification 6/2005, surrender of registration certificate, suppression of facts, benefit of input service credit, wilful suppression, verification of documents, extended period of limitation, penalty under Section 77 and 78.

Service Tax Demand Confirmation:
The appellant filed an appeal against the order confirming a service tax demand of Rs.3,24,493/- along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant, a provider of banking and financial services, surrendered their service tax registration in 2005 based on the belief that they were entitled to the benefit of Notification 6/2005. However, a subsequent survey revealed that the appellant had wrongly claimed the exemption under the notification, leading to the demand for service tax for the entire period. A show-cause notice was issued, and after adjudication, a demand was confirmed against the appellant along with penalties.

Applicability of Notification 6/2005 and Surrender of Registration Certificate:
The appellant argued that they surrendered the registration certificate in 2005 based on the belief that they were eligible for the benefit of Notification 6/2005 due to their taxable services being below Rs.4 lakhs. The appellant's representative contended that suppression cannot be alleged against the appellant, challenging the sustainability of the demand and extended period. However, the appellant admitted to having no case on merits. The department argued that the appellant, being aware of service tax provisions, should have known whether they were eligible for the notification's benefit at the time of surrendering the registration certificate.

Benefit of Input Service Credit and Verification of Documents:
During adjudication, the benefit of input service credit was partially allowed to the appellant. The appellant's representative requested a remand to the adjudicating authority for a reevaluation of the demand for the normal period, offering to produce original invoices and service tax registrations for verification. The department contended that the denial of input service credit was justified due to missing information on invoices.

Extended Period of Limitation and Penalties:
The Tribunal noted that the appellant surrendered the registration certificate in 2005 under Notification 6/2005. The department failed to verify whether the appellant had correctly exited the service tax ambit within a year of surrender. Citing a precedent, the Tribunal held that the extended period of limitation was not applicable in this case. Consequently, the matter was remanded to the adjudicating authority for re-quantification of the demand for the normal period, with a waiver of the penalty under Section 78 and confirmation of a reduced penalty under Section 77.

This comprehensive analysis covers the various issues involved in the legal judgment, addressing the arguments presented by both parties and the Tribunal's findings on each aspect of the case.