2018 (9) TMI 760 - HC - Service Tax

Extended period of limitation - Whether in the facts and circumstances of the case and in law was the Tribunal correct in holding that the extended period of limitation is not invokable? - Whether in the facts and circumstances of the case and in law was the Tribunal justified in setting aside the demand for extended period and consequently penalty under Section 78 of the Finance Act, 1994? Held that - It is undisputed before us that the issue of a charitable institution rendering the service of Commercial Training and Coaching being chargeable to service tax under the Act was a debatable issue before the decision in Sri Chaitanya Educational Committee 2015 (6) TMI 627 - CESTAT BANGALORE (LB) was rendered on 1st June 2015 - No fault can be found in the present facts with the impugned order of the Tribunal restricting the demand only to that extent of normal period of limitation and deletion of equivalent penalty under Section 78 of the Act. This as the Tribunal found on facts and on the basis of the law that the Respondent was under a bonafide belief that no service tax is payable by a charitable institution rendering the service of Commercial Training and Coaching. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Whether the extended period of limitation is invokable?
- Whether the Tribunal was justified in setting aside the demand for the extended period and penalty under Section 78 of the Finance Act, 1994?

Analysis:
1. The Respondent, a public charitable trust providing educational services, believed they were exempt from service tax under the Act. However, the Revenue issued Show Cause Notices seeking to recover service tax for specific periods and imposing penalties. The Commissioner confirmed the Notices, including the extended limitation period and penalties.

2. The Respondent appealed to the Tribunal, which confirmed the tax liability for charitable institutions providing educational services. However, the Tribunal allowed the appeal regarding the extended limitation period and deleted the imposed penalties, citing the issue's debatable nature and referencing a previous case.

3. The Revenue objected to the deletion of demands beyond the normal limitation period and the penalty. The Court noted that the issue of taxing charitable institutions for commercial training services was debatable until a specific case clarified it in 2015. The Tribunal's decision to restrict the demand to the normal limitation period was deemed reasonable, considering the Respondent's genuine belief about tax liability.

4. The Court found no substantial legal question in the Revenue's arguments and dismissed the appeal, upholding the Tribunal's decision. The Court emphasized the Respondent's genuine belief in their exemption from service tax due to the debatable nature of the issue before a clarifying judgment in 2015.