2008 (10) TMI 178 - AT - Service Tax

Commissioner (Appeals) in the impugned order concluded that under CEA or Finance Act 1994, Revenue cannot proceed against the dissolved firm for recovery of the differential service tax alleged to have been under assessed by exclusion of cost of materials utilized in providing service of photography - there has been no suppression of facts, as the respondents had been filing the ST-3 returns regularly - moreover, no action taken when respondents surrendered Registration Certificate - impugned order holding larger period not invocable, is correct - further, held that cost of materials is not includible

Summary

Issues involved:
1. Validity of re-assessment of services post-dissolution of a firm under Central Excise Act and Finance Act.
2. Survivability of demand of differential service tax raised by show cause notice invoking a larger period of limitation.
3. Merits of the demand of differential service tax raised by the show cause notice.

Analysis:

1. Validity of re-assessment post-dissolution:
The Commissioner (Appeals) concluded that Revenue cannot proceed against a dissolved firm for recovery of differential service tax post-dissolution. The dissolved firm had registered under Service Tax Registration and regularly filed returns. Despite dissolution and cancellation of registration, a show cause notice was issued for differential service tax. The Commissioner relied on case laws to support that after assessments and firm dissolution, there is no provision for Revenue to revise assessments. The Revenue challenged this decision citing provisions of the Indian Partnership Act, 1932, arguing that liability remains even post-dissolution. However, the Advocate for the respondent argued that once a firm is dissolved, no proceedings can be initiated against it.

2. Survivability of demand with extended limitation:
The Commissioner found no suppression of facts as ST-3 returns were regularly filed and scrutinized. The Revenue contended that new facts can lead to re-assessment and demand of differential service tax within the time limit provided. However, the Commissioner's decision on the time-barred demand was upheld, emphasizing that no objections were raised during the surrender of the registration certificate and longer periods could not have been invoked.

3. Merits of the demand:
The Commissioner relied on the Supreme Court's decision to conclude that the value of materials cannot be excluded from gross receipts for service tax calculation. The Revenue challenged this decision, referring to various case laws to support their argument. The Tribunal, however, upheld the Commissioner's decision, stating that the issue had been settled in previous cases and there was no need to delve into the Revenue's appeals. The Tribunal agreed with the Commissioner on the question of the extended period and rejected the Revenue's appeals.

In conclusion, the Tribunal dismissed the Revenue's appeals, upholding the Commissioner's decision on the issues in favor of the respondents. The judgment highlighted the importance of legal provisions, case laws, and the specific circumstances of the case in determining the liability for service tax post-dissolution and the calculation of tax liabilities based on the value of materials provided during services.