2018 (5) TMI 1527 - AT - Service Tax

Time limitation - Pandal or Shamiana Service - Organization of Garba for cultural function - Circular of the Board dated 10.09.2004 - Held that - Admittedly, the question involved is very much a matter of interpretation of Board Circular and the appellants were under bonafide impression that they were not liable to pay tax as their activity was closely associated with religious functions as well - extended period cannot be applied to the present demand. Since the entire period of the demand is beyond the period of limitation, the SCN is therefore, liable to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of services provided for the organization of Garba events
2. Interpretation of Board Circular regarding service tax liability for religious activities
3. Application of limitation period for demand of service tax

Analysis:
1. The appellant, registered under 'Pandal or Shamiana Service,' provided taxable services related to organizing Garba events in 2004 & 2005. A show cause notice resulted in a demand of service tax and penalty. The appeal confirmed the demand and interest but set aside the penalty under Section 80 of the Finance Act, 1994. The appellant challenged the order primarily on the ground of limitation, not contesting the demand on merit. The contention was that the Garba events were associated with religious functions, citing a Board Circular exempting service tax for services provided for pure religious ceremonies. The appellant believed their activities were exempt and referred to a judgment by the Gujarat High Court supporting their interpretation.

2. The Revenue reiterated the findings of the Commissioner (Appeals) in the impugned order. The Tribunal upheld the taxability of services provided for organizing Garba events, distinguishing between Garba as a religious event and a cultural function. The Commissioner acknowledged a bonafide mistake in interpretation by the appellant regarding the Circular's applicability, stating no malafide intention to evade tax. The Tribunal noted that the question involved interpretation of the Board Circular, and the appellant genuinely believed their services were not taxable due to their association with religious functions. Consequently, the extended period for demand was deemed inapplicable, setting aside the show cause notice and ruling the Commissioner's order unsustainable due to limitation.

3. In conclusion, the Tribunal allowed the appeal, emphasizing that the demand period exceeded the limitation period, rendering the show cause notice invalid. The order highlighted the genuine belief of the appellant in the non-taxability of their services due to their religious nature, ultimately setting aside the demand and penalty imposed.