2012 (9) TMI 337 - HC - Service Tax

Extended period of limitation clearing and forwarding agent - 16-7-1997 to 31-8-1999 - Held that - Show cause notice under the provisions of Section 65, 66 and 67 of the Finance Act, 1994 was issued on 2-7-2002 after a period of about three years - no omission or failure on the part of the assessee to make return under Section 70 of the Finance Act, 1994 for any prescribed period or to disclose wholly and truly all material facts necessary for assessment for any prescribed period and the value of taxable service for that prescribed period has escaped assessment or has been under assessed - case of the assessee comes within the definition of bona fide doubt and in that event, the extended period as provided under Section 73 of the Finance Act, 1994 would not be applicable - appeal is dismissed.

Issues Involved:
1. Liability of the respondent to pay Service Tax under Chapter V of the Finance Act, 1994, for services received from consignment agents during the period 16-7-1997 to 31-8-1999.
2. Justification of the Tribunal in holding the show cause notice as time-barred without considering the reasons assigned by the Appellate Commissioner.
3. Correct interpretation of Section 73 of the Finance Act, 1994, by the Appellate Commissioner and Appellate Tribunal.

Detailed Analysis:

1. Liability to Pay Service Tax:
The core issue was whether the respondent was liable to pay Service Tax for services received from consignment agents during the specified period. The service provided by the "clearing and forwarding agent" became exigible to Service Tax from 16-7-1997, and the service receiver was responsible for collecting the Service Tax due to amendments in the Service Tax Rules, 1994. The revenue issued a show cause notice to the respondent for recovery of Service Tax amounting to Rs. 1,97,35,583/-. The Assistant Commissioner confirmed the demand and imposed penalties and interest. However, the Commissioner (Appeals) later dropped the demand for the period up to 15-9-1998 and confirmed the demand for the period after 16-9-1998.

2. Time-Barred Show Cause Notice:
The Tribunal held that the show cause notice was time-barred. It is established that the extended period for raising demand is not available to the department where there are conflicting views of the Tribunal on any issue. The Tribunal noted that due to the conflicting decisions, there was a bona fide belief on the part of the assessee that it was not liable to pay the tax, thus procedural failure could not be penalized under the extended period. Consequently, the appeal of the assessee was allowed, and the demand notice was quashed on the ground of limitation, leading to the rejection of the revenue's appeal.

3. Interpretation of Section 73 of the Finance Act, 1994:
Section 73 deals with the value of taxable services escaping assessment. It allows the Central Excise Officer to issue a notice within five years in cases of omission or failure by the assessee or within six months in other cases. The Tribunal and the Commissioner (Appeals) interpreted this provision in light of the conflicting decisions and bona fide doubt principle. The Tribunal concluded that due to the conflicting views, the case involved bona fide doubt, and thus, the extended period under Section 73 was not applicable. The Supreme Court's decisions in Jaiprakash Industries Ltd. and Continental Foundation Jt. Venture were cited to support this interpretation, emphasizing that suppression of facts must be willful and with intent to evade duty.

Conclusion:
The High Court affirmed the Tribunal's view that the show cause notice was time-barred due to the bona fide doubt created by conflicting decisions. The extended period under Section 73 was not applicable as there was no willful suppression of facts with intent to evade tax. Consequently, the appeal was dismissed, and the Tribunal's decision was upheld. The Court did not address the first question on merits, as it was not dealt with by the Tribunal.

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