2012 (9) TMI 76 - AT - Service Tax

Extended period of limitation whether the cost of materials used in providing photographic services is required to be added in assessable value or not - Held that - There was bona fide doubt about the inclusion of the cost of material in the cost of services - no mala fide can be attributable to the appellant so as to invoke the extended period of limitation

Summary

Issues:
1. Inclusion of cost of materials in assessable value for photographic services.
2. Invocation of extended period of limitation for demands raised.
3. Applicability of penalties based on mens rea.

Analysis:
1. Inclusion of Cost of Materials: The appellants and respondents, engaged in providing photographic services, were in dispute regarding whether the cost of materials used in providing such services should be added to the assessable value. The Judicial Member noted that the issue was settled against the appellants by a Larger Bench decision of the Tribunal in a previous case. The Tribunal held that the cost of material used for providing services is to be included in the assessable value.

2. Extended Period of Limitation: The advocate representing the appellants argued that demands raised invoking the extended period of limitation should be barred. Referring to a previous case involving Centre Point Colour Lab & Agarwal Photo Finish, the Tribunal observed that demands beyond the limitation period should be time-barred. The Tribunal emphasized that due to divergent views and earlier decisions favoring the assessee, there was a bona fide belief regarding the non-inclusion of material costs in the value of services. Therefore, no penalty was required to be imposed based on the extended period of limitation.

3. Applicability of Penalties: The Tribunal considered the issue of penalties in cases where demands were raised within the normal period of limitation. Citing precedents and the absence of mens rea on the part of the service providers, penalties were not imposed. The Tribunal set aside penalties where appeals were filed by the assessee and upheld decisions where penalties were set aside by the Commissioner (Appeals).

In conclusion, the Tribunal disposed of all appeals by remanding the matters to the original adjudicating authority to confirm demands falling within the normal period of limitation. Penalties were not imposed due to the absence of mens rea and the presence of bona fide belief based on previous decisions and interpretations.