2018 (1) TMI 1129 - AT - Service Tax

Abatement - photographic services - benefit of N/N. 12/2003-ST dt. 20.6.2003 - extended period of limitation - Held that - the issue whether the cost of material has to be included in the value of taxable services in photographic services while discharging service tax liability was highly contentious during the disputed period and there were conflicting decisions - On such score, we are of the considered opinion that the appellant has made out a case on the ground of limitation - appeal allowed - decided in favor of appellant.

Issues:
1. Whether the cost of material used in providing photographic services should be included in the taxable value for discharging service tax liability.
2. Whether the appellant is liable to pay service tax on the gross value of the amount received.
3. Whether the appellant is eligible for abatement under Notification No.12/2003.
4. Whether the demand for service tax is time-barred.
5. Whether the penalty imposed under Section 76 of the Finance Act, 1994 should be upheld.

Analysis:
1. The appellants, engaged in providing photographic services, faced a dispute regarding the inclusion of the cost of materials in the taxable value for service tax liability. The department contended that service tax should be paid on the gross amount received. The Tribunal noted conflicting decisions on this issue during the disputed period. Referring to a judgment by the Punjab & Haryana High Court, it was held that service tax is not leviable on the cost of materials used in services. Due to the contentious nature of the issue and lack of clarity, the appellant's plea on the ground of limitation was accepted, and the appeal was allowed, setting aside the demand for service tax based on the cost of materials.

2. The department argued that the appellants, who collected service tax, were liable to pay the demand under Section 11(D) of the Finance Act. However, the Tribunal found that there was no specific time limit prescribed under Section 11(D) and applied the time limit provided under Section 11A. Citing various precedents, the Tribunal ruled in favor of the appellant on the ground of limitation, dismissing the department's appeal and allowing the appellant's appeal.

3. The eligibility of the appellant for abatement under Notification No.12/2003 was contested by the department, claiming that necessary documentary evidence was not furnished. However, the Tribunal's decision on the ground of limitation rendered this issue moot as the demand for service tax was set aside.

4. Regarding the time-barred nature of the demand for service tax, the appellant successfully argued that the demand was beyond the limitation period due to the contentious nature of the issue and the lack of clarity during the disputed period. The Tribunal accepted this argument, setting aside the impugned order and allowing the appeal with consequential relief.

5. The penalty imposed under Section 76 of the Finance Act was set aside by the Commissioner (Appeals) and was a subject of contention in the appeals. The Tribunal's decision on the ground of limitation rendered the issue of penalty moot, as the appeal was allowed based on the lack of clarity and conflicting decisions during the disputed period.

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