2012 (11) TMI 788 - AT - Service Tax

Extended period of limitation - Demand of service tax - the plea of limitation was raised for the first time before the Commissioner (Appeals). - held that - the adjudicating authority did not have occasion to consider any plea of limitation. - The appellate authority chose to consider that plea, and held in favour of the assessee and, that too, without going into the merits of the case. This action of the learned Commissioner (Appeals) has no justification in law and hence his order requires to be set aside. - Issue remanded back to commissioner (appeals) with a request for fresh decision on the assessee s appeal on merits in accordance with law and the principles of natural justice. On the question whether limitation could be lawfully pleaded for the first time by the assessee before the first appellate authority, the learned Commissioner (Appeals) shall hear both sides with due notice. Needless to say that, in the event of this issue being held in favour of the assessee/appellant on legally sustainable grounds, the plea of limitation shall be examined with reference to relevant date defined under Section 73(1) of the Finance Act 1994 and in the light of applicable case law.

Summary

Issues:
- Dropping of demand of service tax and penalties by lower appellate authority based on limitation grounds without examining merits.

Analysis:
1. The original authority confirmed a demand of service tax and penalties against the respondent based on a show-cause notice. The Commissioner (Appeals) set aside the demands solely on the ground of limitation without considering the merits. The department contended that the show-cause notice was issued within the extended period of limitation as defined under Section 73(1) of the Finance Act 1994. They relied on previous tribunal and Supreme Court decisions to support their argument. The department argued that the appellate authority did not consider the definition of the relevant date under the Act while deciding on the limitation issue.

2. The appellate tribunal noted that there was no proper reply to the show-cause notice from the respondent, and no indication of any plea of limitation was raised before the original authority. The tribunal emphasized that the plea of limitation was raised for the first time before the Commissioner (Appeals) and was decided in favor of the respondent without examining the merits of the case. The tribunal found the Commissioner's decision on limitation to be unjustified and lacking a proper reasoning or reference to relevant factors.

3. The tribunal set aside the impugned order and remanded the case to the Commissioner (Appeals) for a fresh decision on the merits of the appeal. The tribunal instructed the Commissioner to consider the plea of limitation with reference to the relevant date defined under the Finance Act 1994 and in light of applicable case law. The tribunal directed both parties to be heard on the issue of limitation to ensure a legally sustainable decision is reached.

In conclusion, the appellate tribunal found that the lower appellate authority erred in solely relying on limitation grounds to drop the demand of service tax and penalties without examining the merits of the case. The tribunal emphasized the importance of considering both limitation and merits in such cases and remanded the matter for a fresh decision in accordance with the law and principles of natural justice.