2014 (8) TMI 374 - AT - Service Tax

Demand of service tax - Bar of limitation - Invocation of extended period of limitation - Held that - If the normal period for issuing show-cause notice is to be one year from 14-11-2003, extended period would be 5 years on that date. In view of the fact that during the whole period from 1997-1998 till 2008, the appellant had not fulfilled statutory obligation of filing the return or intimating the department, it has to be held that the extended period is correctly invoked. Under these circumstances, the demand of service tax and interest thereof are to be upheld and accordingly are upheld. - However, penalties are set aside - Decided partly in favour of assessee.

Summary

Issues:
1. Service tax liability for the period from 16th November, 1997 to 2nd June, 1998.
2. Validity of show-cause notice issued in 2004.
3. Invocation of extended period for issuing show-cause notice.
4. Imposition of penalty under Sections 76 & 77 of the Finance Act, 1994.

Analysis:

Issue 1: Service tax liability for the period from 16th November, 1997 to 2nd June, 1998
The appellant was required to pay service tax for services received during the mentioned period. The retrospective amendments of the Finance Act were considered, and decisions of the Hon'ble Supreme Court and Larger Bench were taken into account. The appellant failed to pay service tax and interest before the specified dates, leading to a show-cause notice being issued in 2008. The extended period for invoking the show-cause notice was deemed valid due to the appellant's non-compliance with statutory obligations. Consequently, the demand for service tax and interest was upheld.

Issue 2: Validity of show-cause notice issued in 2004
The question arose regarding the validity of the show-cause notice issued in 2004, beyond the one-year period from 14-11-2003. Citing precedent from the case of Mangalam Cement Ltd., the Tribunal held that if the department had knowledge and a show-cause notice was required to be issued, the one-year period should be counted from 14-11-2003. Therefore, the show-cause notice issued in 2004 was considered valid when the extended period was invoked.

Issue 3: Invocation of extended period for issuing show-cause notice
The Revenue discovered the appellant's liability in 2006-07 during an audit, leading to the issuance of a show-cause notice in 2008. Since the appellant had not fulfilled the obligation of filing returns or informing the department from 1997-1998 till 2008, the extended period for issuing the notice was deemed correctly invoked. Consequently, the demand for service tax and interest was upheld.

Issue 4: Imposition of penalty under Sections 76 & 77 of the Finance Act, 1994
Regarding penalties imposed under Sections 76 & 77 of the Finance Act, 1994, the appellant argued lack of awareness of their liability, especially for a short period in 1997-98. Considering the litigations and decisions in favor of the appellant, the benefit of Section 80 was extended. The Tribunal set aside the penalties imposed under Sections 76 & 77, as the non-payment of penalty was deemed to be due to lack of awareness, entitling the appellant to the benefit of Section 80.

In conclusion, the judgment upheld the demand for service tax and interest while setting aside the penalties imposed under Sections 76 & 77, granting the appellant the benefit of Section 80 due to lack of awareness of their liability.