2024 (7) TMI 310 - AT - Service Tax

Invocation of Extended period of Limitation - appellant was registered with service tax but not filing ST-3 returns - HELD THAT - In this case the vital question to decide that extended period of limitation is invocable or not, is the investigation conducted against the appellant in the Year 2016 itself wherein certain communications were exchanged between the appellant and the department for asking certain documents and why they are not paying service tax on their activity. But thereafter, no action has been taken against the appellant within time bound period and only after 4 years a show cause notice has been issued to the appellant. Further, a clarification was also sought which was answered that on the activity undertaken, no service tax is payable. Further, the issue involved in this case, whether they are liable to pay service tax or not was also referred to the third member to deciding the issue. As there is a difference of opinion between the members of this Tribunal, whether the activity undertaken by the appellant is taxable or not. As the activity undertaken by the appellant itself under doubt whether it is taxable or not and investigation was conducted against the appellant in 2016 itself. The extended period of limitation is not invocable - SCN issued to the appellant is barred by limitation - the impugned order is set aside - appeal allowed.

Summary

Issues involved:
- Appeal against demand of service tax, interest, and penalties
- Contention on limitation for invoking extended period
- Whether extended period of limitation is invocable

Analysis:
1. The appellant appealed against an order confirming a demand of service tax, interest, and penalties. The appellant, an Electrical Contractor providing Works Contract Service, was subcontracted for transmission and distribution of electricity. The demand was based on data showing undeclared receipts for services provided during a specific period. The appellant contested the matter on limitation, citing a clarification received in 2014 stating no service tax liability for their activity. The appellant argued that no proceedings were initiated until a show cause notice was issued in 2020, invoking the extended period of limitation.

2. The appellant's counsel argued that the activity was not taxable based on the clarification received in 2014. The Authorized Representative opposed, stating the appellant was aware of the tax liability as per their tender document. The Representative contended that the appellant should have filed service tax returns if they had a bona fide intention. The Representative cited previous tribunal decisions to support the invocation of the extended period of limitation.

3. The key issue was whether the extended period of limitation was applicable. The Authorized Representative argued that since the appellant was registered but not filing returns, the extended period was rightly invoked. However, the Tribunal noted that in this case, an investigation was conducted in 2016, and communications were exchanged regarding the non-payment of service tax. Despite this, no action was taken against the appellant within a reasonable timeframe. Additionally, a clarification was obtained stating no service tax liability for the appellant's activity, which was also referred to a third member for a decision due to differing opinions within the Tribunal.

4. Considering the doubts surrounding the taxability of the appellant's activity and the investigation conducted in 2016, the Tribunal concluded that the extended period of limitation was not applicable. The Tribunal held that the show cause notice issued to the appellant was barred by limitation. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

In conclusion, the Tribunal's decision focused on the timing of the investigation, the communication with the appellant, and the doubts regarding the tax liability of the appellant's activity to determine the applicability of the extended period of limitation.