2009 (10) TMI 206 - AT - Service Tax

Tour Operator Service-extended period- Notification No. 58/98-ST, dated 1.7.1998- Service tax levy on Tour operator service was challenged by tourist taxi owners association before the High Court of which the assessee were members. During pendency of that petition, Notification No 58/98-ST, dated 1.7.1998 was issued granting exemption from payment of service tax on tour operator service which exemtion was withdrawn on 1.4.2000. Thereafter, service tax on tour operator s service become leviable w.e.f. 1.4.2000. On 30.4.2001, the High Court dismissed the petition filed by the Tourist taxi owners Association challenging the constitutional validity of the levy. The assistant commissioner dropped the proceedings on the ground that the demand was barred by limitation. The commissioner revised the said order and held that failure on the part of the assesese to remit service tax dues specially when the High Court upheld the levy and their stubborn attitude of withholding the information by not filing the half yearly returns for the disputed period, was nothing but suppression of facts and deliberate and willful intent to evade payment of service tax and, therefore, extended period of time limit under section 73 was very much invocable in the instant case for demand of service tax for the disputed period. Held that- the findings of the commissioner is not sustainable. When everything was known to both sides, there could be no allegation of suppression. Therefore, the extended period of limitation was not available to the department. Since the demand has been raised after the expiry of the normal period of limitation, it was time barred and accordingly, the impugned order confirming tax demand and penalties was to be set aside and the appeal was to be allowed.

Summary

Issues:
Challenge to service tax demands under 'Tour Operator Service' and imposition of penalties.

Analysis:
The judgment pertains to a challenge against service tax demands and penalties imposed on tour operators. The levy of service tax on 'Tour Operator Service' was introduced on 1-9-1997, challenged in court, and subsequently exempted and re-imposed. The High Court upheld the levy's constitutional validity in 2001. The appellants began paying service tax from May 2001. The jurisdictional Superintendent sought recovery of income tax for a specific period, leading to appeals dismissed by the Commissioner in 2001. Similar actions were taken in 2004 and 2005. The Assistant Commissioner initiated proceedings in 2005 proposing recovery of service tax and penalties. Orders-in-Original were passed, dropping proceedings for recovery based on limitation. The Commissioner of Service Tax issued revision notices in 2007, upholding the liability to service tax and imposing penalties for the period April 2000-01.

The main issue addressed in the judgment was the finding on limitation by the Commissioner (Appeals). The Commissioner's order highlighted the failure of the assessee to remit service tax despite being aware of the liability, leading to the invocation of the extended time-limit under section 73 of the Finance Act. The Commissioner found that the failure to pay service tax and file returns, even after the High Court's decision upholding the levy, constituted suppression of facts with intent to evade payment. The Commissioner emphasized the importance of voluntary compliance and the consequences of withholding information.

However, the judgment ruled that the finding on limitation was not sustainable. It was argued that once the High Court upheld the levy, the department should have issued a show-cause notice within the normal limitation period, as all facts regarding the liability were known. The judgment emphasized that when both parties are aware of the facts, there can be no allegation of suppression of facts. It was noted that no protective show-cause notice was issued during the relevant period, rendering the extended period of limitation unavailable to the department. As the demands were raised after the normal limitation period, the judgment held them to be time-barred, setting aside the orders confirming tax demands and penalties on the grounds of limitation.

In conclusion, the judgment provides a detailed analysis of the challenges faced by tour operators regarding service tax demands and penalties, focusing on the issue of limitation and the importance of timely compliance and notice issuance by the tax authorities.