2016 (8) TMI 949 - AT - Service Tax

Rectification of mistake penalty demand barred by limitation - classification - online educational services commercial training or coaching services - online information and data base access or retrieval services malafide intention Held that - when the Revenue itself was not clear about the classification of the appellants activity and in fact proposed the classification, in the show cause notice under the category of online information and data base access or retrieval service . Inasmuch as the issue was not free from doubt and was not settled, any malafide cannot be attributed to the assessee, so as to invoke the longer period of limitation. Accordingly, the demand raised by invoking the extended period, is not justifiable - penalty not imposed appeal allowed on point of limitation rectification of mistake disposed off decided in favor of appellant.

Issues involved:
1. Rectification of mistake in Final Order
2. Taxability of online educational service under "Commercial training or coaching service"
3. Consideration of limitation issue in the appeal
4. Applicability of extended period for raising demand
5. Justifiability of penalty imposed

Issue 1: Rectification of mistake in Final Order
The appellant filed a Misc application seeking rectification of a mistake in the Final Order where their appeal was rejected on merits following a Larger Bench decision. The appellant argued that the demand was also challenged on the point of limitation, which was consistently raised but not considered by the Tribunal. Citing various High Court and Tribunal decisions, the appellant contended that failure to consider the limitation aspect amounts to a mistake requiring rectification. The Tribunal agreed, noting that the plea of limitation was specifically raised but not addressed in the Final Order, leading to a manifest error that justified rectification.

Issue 2: Taxability of online educational service
The key issue was whether the online educational service provided by the appellant should be taxable under the category of "Commercial training or coaching service." The Larger Bench of the Tribunal had previously held such services as taxable under this category, leading to the remittance of appeals to regular Benches for decision. The regular Bench, in this case, rejected the appeal on merits following the Larger Bench decision. However, the Tribunal acknowledged that the demand was proposed under a different category initially, indicating uncertainty in the classification of the appellant's activity. Given the lack of clarity and the evolving nature of the classification issue, the Tribunal held that the demand under the extended period was not justifiable, ultimately allowing the appeal on the point of limitation.

Issue 3: Consideration of limitation issue in the appeal
The appellant consistently raised the issue of limitation, contending that the demand was hopelessly barred by limitation. Despite the submissions made on the time bar issue, the Tribunal did not address this aspect in the Final Order. Citing legal precedents, the Tribunal recognized that failure to consider the limitation issue amounted to a mistake requiring rectification. Consequently, the Tribunal allowed the rectification application and proceeded to decide the issue on limitation.

Issue 4: Applicability of extended period for raising demand
The Tribunal scrutinized the timeline involved in the appeal and noted discrepancies in the issuance of show cause notices and the classification of the appellant's services. Emphasizing that the Revenue was aware of the appellant's activities from an earlier show cause notice, the Tribunal questioned the delay in issuing the subsequent notice invoking the extended period. Referring to legal judgments, the Tribunal held that the extended period would not be available to the Revenue for raising the demand due to the lack of clarity and differing views on the classification of the appellant's activity. Consequently, the Tribunal set aside the impugned order and allowed the appeal on the point of limitation.

Issue 5: Justifiability of penalty imposed
Considering the uncertainties and disputes surrounding the classification of the appellant's activity, the Tribunal concluded that no malafide could be attributed to the appellant for invoking the extended period of limitation. As a result, the Tribunal held that the penalty imposed on the appellant was not justifiable and set aside the impugned order. The appeal was allowed on the point of limitation, and the ROM application was disposed of accordingly.

← Previous Next →