2012 (7) TMI 705 - AT - Service Tax

Short payment of service tax - extended period of limitation - appellant had bifurcated services provided by him in various stage as consulting and non-consulting category - service tax was paid only on those categories of services which were suo motu identified as consulting services Held that - They were filing regular returns with the Department. It cannot be held that there was any suppression or misstatement of facts by the appellants with intention to evade payment of service tax demand. Show cause notice having been issued on 3.10.2006 for the period 1.10.98 to 31.03.05 is admittedly beyond the normal period of limitation. Demand is barred by limitation. Appeal is allowed on merits as also on limitation.

Summary

Issues:
Service tax liability on consulting and non-consulting services provided by the appellant. Challenge against the order confirming service tax demand, interest, and penalties. Vivisection of the contract for service tax purposes. Limitation period for raising the demand.

Analysis:
The appellant provided consultancy services to government bodies and state corporations for water supply projects, including technical assistance, financial services, liaison with statutory bodies, and obtaining approvals. The services were divided into consulting and non-consulting categories, with service tax paid only on consulting services. Revenue alleged short payment of service tax on non-consulting services, leading to a demand notice and subsequent order confirming the demand, interest, and penalties.

The Commissioner (Appeals) upheld the order, emphasizing that the work stages were interlinked, and the contract could not be vivisected for service tax purposes. Citing precedent, it was held that contracts cannot be divided to avoid service tax on certain services. However, a later Larger Bench decision allowed vivisection of composite contracts, undermining the Revenue's argument.

The Tribunal noted that the appellant undertook non-technical jobs beyond consulting engineer services, such as obtaining approvals, which were not taxable under consulting engineer services. Referring to relevant case law, it was held that non-technical services provided by the appellant were not taxable under consulting engineer services.

Regarding the limitation period, it was observed that the demand was raised beyond the normal period, despite the appellant being registered and regularly filing returns. The appellant's disclosure of service bifurcation to the Revenue was considered, leading to the conclusion that there was no suppression of facts to evade service tax. Consequently, the demand was held to be barred by limitation.

In conclusion, the appeal was allowed on both merits and limitation grounds, setting aside the impugned order and providing consequential relief to the appellants.