2009 (8) TMI 305 - AT - Service Tax

Time Bar under section 73 suppression Show Cause Notice issued in October, 2005 for periods from 2000-01 to 2003-04, the authority had the knowledge in December, 2001 on non registration and non- payment of service tax by one of the partners of appellant firm. In this case Tri.-(Chennai) held that no suppression arises, thus the demand hit by time-bar. Revision order set aside.

Summary

Issues:
1. Recovery of service tax on Rent-a-Cab Scheme Operators Service.
2. Liability of partners in a partnership firm for service tax.
3. Bar on demand due to limitation period.

Analysis:
1. The appeals involved a common issue of recovery of service tax on Rent-a-Cab Scheme Operators Service provided by a partnership firm. Two show-cause notices were issued proposing recovery of service tax, with one notice marked to the partners of the firm. The Assistant Commissioner adjudicated the notices, imposing penalties on all three partners. The Commissioner (Appeals) upheld the decision, leading to multiple appeals filed by the partners and the firm. The Tribunal heard the appeals together and decided on the issue.

2. The Tribunal considered the argument of the partners that no demand could be confirmed against them without a specific show-cause notice proposing recovery of tax from them individually. Merely marking copies of the notice to the partners was deemed insufficient. The Tribunal agreed that the partners could not be held liable without proper notice, setting aside the demands confirmed against them and allowing the appeals filed by the partners.

3. Regarding the limitation period for the demand, the partnership firm contended that the notice issued was beyond the statutory period of limitation. The firm argued that the department had prior knowledge of non-registration and non-payment of service tax by one of the partners, which should have prevented the application of a longer limitation period. The Tribunal found merit in this argument, stating that the demand was time-barred due to the department's prior knowledge. Consequently, the Order-in-Revision confirming the demand was set aside, and the appeals related to the limitation issue were allowed.

In conclusion, the Tribunal ruled in favor of the partners of the partnership firm, setting aside the demands confirmed against them and allowing the appeals related to the limitation period. The judgment highlighted the importance of proper show-cause notices and the impact of the limitation period on tax recovery actions.