2018 (5) TMI 824 - AT - Service Tax

Extended period of limitation - demand of service tax - P.F./E.S.I. reimbursement and labour charges received from the service receiver - Held that - the period of dispute, in this case, is from April, 2007 to March, 2012 and the show cause notice was issued on 27/09/2012 - the ingredients mentioned in the proviso to Section 73(1) of the Act are absent in this case. Thus, part of the confirmed adjudged demand is barred by limitation of time. The service tax demand has also been confirmed within the normal period of limitation, which should be paid by the appellant. Appeal allowed in part.

Summary

Issues:
1. Service Tax demand confirmation with interest and penalty imposition.
2. Barred by limitation of time.
3. Applicability of Section 73(1) of the Act.
4. Bonafide belief for non-payment of service tax.
5. Invocation of Section 80 of the Act.

Analysis:
1. The appeal challenged an order confirming a Service Tax demand of ?94,00,365 along with interest and penalty under Section 78 of the Finance Act, 1994, passed by the Commissioner of Central Excise Jaipur. The appellant, engaged in 'Man Power Recruitment & Supply Agency' service, did not deposit Service Tax amount for P.F./E.S.I. reimbursement and labour charges during April 2007 to March 2012, leading to show cause proceedings initiated by the Department.

2. The appellant contended that the proceedings were time-barred as the show cause notice was issued on 27/09/2012, beyond the normal period under Section 73(1) of the Act. The appellant maintained that due to adequate accounting records and an opinion from a Service tax consultant, the demand was unjustified beyond the normal limitation period. The Department argued against this contention.

3. The Tribunal observed that for issuance of a show cause notice beyond one year, the Department must prove suppression, fraud, or misstatement with intent to defraud revenue. Based on records and consultant opinions, the Tribunal found that the Department failed to establish the necessary ingredients for invoking the longer limitation period. Consequently, part of the confirmed demand was time-barred, while the rest fell within the normal limitation period and was deemed payable by the appellant.

4. The Tribunal noted that the non-payment of Service Tax was due to the appellant's genuine belief that it was not liable to pay, rather than any fraudulent intent. Therefore, the Tribunal considered invoking Section 80 of the Act to waive penalties under sections 76 and 78.

5. Ultimately, the Tribunal partly allowed the appeal by setting aside the order confirming the demand beyond the normal limitation period and also nullified the imposed penalties. The decision was made based on the absence of necessary elements for extending the limitation period and the appellant's genuine belief in non-liability for Service Tax payment.

Conclusion:
The Tribunal's decision focused on the limitation period for the Service Tax demand, the absence of fraudulent intent, and the invocation of Section 80 of the Act to waive penalties. The appeal was partially allowed, with the demand confirmed within the normal limitation period deemed payable by the appellant, while penalties were waived due to the appellant's bonafide belief in non-payment liability.