2018 (4) TMI 1183 - AT - Service Tax

Extended period of limitation - Clearing and Forwarding Service - Department took the view that assessee should have paid the service tax for the earlier period 1.9.2003 to 8.7.2004 also and under category of Business Auxiliary Service - validity of SCN - time limitation - Held that - the activities of the assessee would be only under C&F service. In a situation where the department has initiated proceedings demanding service tax liability against a person for a particular period, under a particular service, in the normal course, it would be expected that the department would issue periodical show cause notices till the matter is finally settled. There is no evidence that this has been done. The appellants were continuing to function under an agreement which was identical to the earlier one when department had demanded tax liability from them under C&F service. This being so, Department should have continued to issue protective periodical show cause notice on the very same C&F service. This was not done. Time limitation - Held that - the department cannot wash away the fact that they were well aware of the continued activities of the assessee under the very same terms and conditions which they had been pursuing earlier. This being so, the initiation of the present proceedings after a gap of time, even when the assessee was working under identical agreement, can only be said to be proceedings which are hit by limitation. Appeal allowed in toto.

Summary

Issues:
Taxability of activities under Clearing and Forwarding Service and Business Auxiliary Service, Classification of appellant's activities under BAS, Burden of proof on Revenue to establish taxability, Allegations in show cause notice, Limitation period for proceedings.

Analysis:
1. Taxability of Activities: The case involved a dispute regarding the taxability of the appellant's activities under Clearing and Forwarding Service (C&F) and Business Auxiliary Service (BAS). The High Court had previously held that the appellant's activities fell under C&F service. However, the appellant later obtained registration as a commission agent under BAS and started paying tax under this category.

2. Classification under BAS: The appellant argued that the show cause notice and impugned order did not specify the clause of BAS applicable to their activities. They contended that the burden of proof to establish taxability under BAS lies with the Revenue. The appellant emphasized the need for clarity in specifying the exact allegation against them under BAS.

3. Burden of Proof and Allegations: The appellant highlighted that the impugned order rejected their classification as a commission agent under BAS without specifying the applicable clause of BAS. They cited precedents emphasizing the importance of putting the assessee on notice regarding the alleged tax liability under a specific clause.

4. Limitation Period: The appellant argued that the entire issue was barred by limitation. They contended that the department was aware of their activities, yet initiated proceedings demanding tax liability under BAS for a period when the appellant was already under scrutiny for C&F service. The appellant claimed that the delayed initiation of proceedings rendered them time-barred.

5. Decision: The Tribunal found merit in the appellant's argument regarding the limitation period. Despite not delving into the merits of the case, the Tribunal held that the proceedings were hit by limitation. Consequently, the impugned order was set aside on grounds of limitation, and all appeals were allowed. The decision was based on the principle that the department should have issued protective show cause notices during the ongoing activities under the same terms and conditions.

In conclusion, the Tribunal ruled in favor of the appellant based on the limitation period, emphasizing the necessity for the department to issue timely show cause notices and the burden of proof on the Revenue to establish tax liability under specific service categories.