2009 (5) TMI 69 - AT - Service Tax

Demand and Recovery extended period of limitation section 73 - drawing design technical consultancy services - Scientific and Technical Consultancy Services held that - . It is very clear that for the period from 16.7.2001 to 9.9.2004 show cause notice has been issued on 21.2.2006 after the lapse of the normal period. In the absence of suppression of facts etc. with an intent to evade Service Tax the longer period could not have been invoked - Since they were under the bona fide doubt regarding their activity whether covered by service tax or not therefore there was a reasonable cause on their part in not depositing the service tax in time. Therefore we are of the view that notwithstanding anything contained in the provisions of Section 76 and Section 77 of the Finance Act 1994 the appellants are entitled for the benefit of the Section 80 of the Finance Act and accordingly we hold that no penalty should be imposed on the appellants.

Summary

Issues:
1. Appeal against Order-in-Original No. 01/2008-ST dated 31.1.2008.
2. Service Tax liability on consultancies by M/s. Indian Institute of Chemical Technology.
3. Classification of R & D projects.
4. Board's Clarification on Service Tax for government departments/ministerial grants.
5. Commissioner's findings on specific projects and Service Tax liability.
6. Imposition of penalty under Section 76 and 78 of the Finance Act.
7. Invocation of the longer period for the show cause notice.
8. Time bar for the demand and sustainability of the impugned order.

Analysis:
1. The appeals were filed against Order-in-Original No. 01/2008-ST dated 31.1.2008 by the Commissioner of Customs, Excise, and Service Tax, Hyderabad. One appeal was by the revenue against the same order.
2. M/s. Indian Institute of Chemical Technology (IICT) in Hyderabad had Service Tax liability for consultancies undertaken. Investigations revealed escapement of Service Tax for specific periods with different tax rates.
3. IICT classified its R & D projects into various categories based on instructions. Proceedings were initiated against IICT for non-payment of Service Tax on certain projects.
4. The Board's Clarification stated that Service Tax is not payable for activities involving government grants unless services are rendered on a payment basis.
5. The Commissioner examined each project involving grants-in-aid and found specific projects not eligible for exemption, imposing a Service Tax liability on IICT.
6. The Commissioner found no mala fide intent in IICT's actions and cited a reasonable cause for their failure to pay Service Tax, leading to a decision against imposing penalties under Section 76 and 78 of the Finance Act.
7. The invocation of the longer period for the show cause notice was deemed unjustified due to the absence of mala fide intent or suppression of facts, rendering the entire demand hit by the time bar.
8. As the assessee's appeal was allowed, the revenue's appeal was rejected, setting aside the impugned order due to the lack of sustainability on legal grounds related to time bar and mala fide intent.

This detailed analysis of the judgment showcases the issues involved, the legal interpretations made by the Commissioner, and the final decision of the Appellate Tribunal CESTAT, Bangalore, highlighting the key aspects of the case and the reasoning behind the judgment.