2014 (12) TMI 125 - HC - Service Tax

Waiver of pre-deposit - Period of limitation - Section 73(1) - Held that - Reading of the Section 73(1) clearly indicates under what circumstances period of one year limitation could be considered and when period of five years has to be read instead of one year. Without referring to what exactly was the case of the appellant, so far as issue of limitation is concerned, the Tribunal proceeded to opine in one line that the demand is not time barred as contended by the appellant. As a matter of fact, the appellant also raised a contention that no prima facie case as shown in the show cause notice was forthcoming. If once the Tribunal decides the limitation issue, even if the demand is in order, then the department may not be entitled to collect the amount of service tax and then further impose any penalty. Therefore, the issue of limitation as provided under Section 73 read with the proviso is very relevant and unfortunately, nothing is said about this aspect of the matter in the impugned order. Accordingly, we set aside the order dated 19-8-2013 directing the Tribunal to consider Section 73 of the Finance Act with reference to the date of demand and other relevant facts so far as the present case is concerned and then proceed with the conditional order of stay or otherwise. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 73 of the Finance Act regarding limitation for issuing demand notice.
2. Applicability of the one-year or five-year limitation period based on circumstances.
3. Consideration of limitation before imposing service tax and penalties.

Analysis:

Issue 1: Interpretation of Section 73 of the Finance Act regarding limitation for issuing demand notice
The appellant, a registered Society owned by the Government of Kerala, challenged an order refusing waiver of total service tax and directing pre-deposit. The Tribunal's order lacked discussion on the date of demand notice and provisions of Section 73 of the Finance Act. The appellant contended that the demand notice was time-barred. Section 73(1) of the Finance Act specifies the limitation period for serving a notice for payment of service tax. The Tribunal's failure to address the issue of limitation was a crucial oversight in the impugned order.

Issue 2: Applicability of the one-year or five-year limitation period based on circumstances
Section 73 of the Finance Act outlines the circumstances under which the one-year limitation period can be extended to five years. The Tribunal's cursory dismissal of the appellant's contention on limitation without considering the specific case details was a significant error. The Tribunal must assess whether the demand falls within the one-year or five-year limitation period based on the circumstances of the case, as stipulated in the Finance Act.

Issue 3: Consideration of limitation before imposing service tax and penalties
The Tribunal's failure to address the issue of limitation effectively deprived the appellant of the opportunity to challenge the demand notice. The limitation period under Section 73 is a crucial aspect that determines the validity of the demand for service tax. By setting aside the order and directing the Tribunal to consider Section 73 with reference to the date of demand and other relevant facts, the High Court emphasized the importance of assessing the limitation issue before proceeding with imposing service tax and penalties. This decision highlights the necessity of adhering to procedural requirements, including the consideration of limitation, in matters concerning tax liabilities.