2017 (4) TMI 648 - AT - Service Tax

Works contract - whether the appellant, who were working under works contracts with the Indian Oil Corporation for construction of petrol pump, were required to pay the service tax for the period prior to 1-6-2007? - Held that - there was a reasonable cause on the part of the assessee to entertain a bona fide belief about non-taxability of service being provided by them - The circumstances of the invocation of Section 80 as also invocation of extended period of limitation relate to mala fide on the part of the assessee, with an intent to evade payment of duty. Once that mala fide has not been found for the purpose of Section 80, the same would not be available to the Revenue for invocation of extended period of limitation - demand for the entire period is barred by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Tax liability for the period prior to 1-6-2007, limitation period for demand of service tax.

Analysis:

1. Tax liability for the period prior to 1-6-2007:
The main issue in this case was whether the appellant, engaged in works contracts with the Indian Oil Corporation for constructing petrol pumps, was required to pay service tax for the period before 1-6-2007. The Tribunal referred to a previous judgment and held that no tax liability would arise against the appellant for the period before the specified date. However, a demand was confirmed up to 2008-2009 through a show cause notice issued in 2010.

2. Limitation period for demand of service tax:
The appellant contested the demand on the grounds of limitation, arguing that there was no suppression or misstatement to warrant an extended period for raising the demand. The original adjudicating authority did not impose any penalty on the appellant under Section 80 of the Finance Act, citing a reasonable belief on the appellant's part regarding the non-taxability of the services provided. The Tribunal agreed with the appellant's argument, stating that the invocation of Section 80 and the extended period of limitation were related to mala fide intent to evade duty. Since mala fide intent was not established, the extended period of limitation could not be invoked by the Revenue.

In conclusion, the Tribunal held that the demand for the entire period was barred by limitation. As a result, the impugned order was set aside, and the appeal was allowed in favor of the appellant, granting consequential relief.