2013 (1) TMI 376 - AT - Service Tax

Demand of Service Tax - Extended period of limitation - Photography services - non-inclusion of cost of goods and materials - Circular F. No. 233/2/2003 CX-4 dated 7.4.04 - Held that - Following the decision in case of SHOBHA DIGITAL LAB. (2011 (8) TMI 721 - CESTAT, NEW DELHI)wherein it was observed that due to divergent views of various judicial /quasi-judicial authorities on the issue of inclusion of cost of goods in the assessable value of photography services, there could be a bonafide doubt on the part of the assessee. Therefore demand raised in 2009 for the period 2003-2006 is hopelessly barred by limitation. In favour of assessee

Summary

Issues:
Service tax demand on photography services, imposition of penalties, inclusion of cost of goods in assessable value, invocation of extended period of limitation.

Analysis:
The judgment by the Appellate Tribunal CESTAT New Delhi dealt with the confirmation of service tax against the appellant for Rs.2,30,159/- along with interest, penalties under sections 78 and 77 of the Finance Act, and a daily penalty under section 76. The appellant, engaged in photography services, was registered with the Service Tax department but did not include the cost of goods and materials in the value of services for which tax was being paid.

The demand for service tax was raised through a show cause notice invoking the longer period of limitation for the years 2003 to 2006. The appellant's advocate acknowledged that the issue on merits was against them based on a Larger Bench decision but contested the demand on the grounds of limitation. The advocate argued that prior decisions favored the assessee, leading to a genuine belief about non-inclusion of the cost of goods. Reference was made to Tribunal decisions highlighting the divergence in views on the inclusion of costs in assessable value.

The Tribunal analyzed the limitation aspect, considering a Government Circular clarifying exemptions for service providers and referencing previous decisions and a Supreme Court ruling. It was held that due to the earlier decisions favoring the assessee and the lack of malafide intent, the extended period of limitation could not be invoked. The demand raised in 2009 for the period 2003-2006 was deemed time-barred, as the appellant had been paying service tax without including the cost of goods, which was not questioned by the Revenue during that period.

Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief for the appellants. The stay petition and appeal were disposed of accordingly, following the precedent decision in similar circumstances.

This judgment underscores the importance of considering the limitation period in tax matters, especially when there are divergent views and genuine beliefs based on past decisions. The Tribunal's analysis focused on the appellant's compliance history, the Revenue's actions, and the prevailing legal interpretations to determine the applicability of the extended limitation period in this case.