Bona fide exemption belief justified limitation defence and waiver of pre-deposit in a service tax dispute

The dispute concerned service tax on computer training for the period before the amendment to Notification No. 24/04-ST by Notification No. 19/05-ST. The assessee's bona fide belief that the activity was exempt was accepted for limitation purposes because Tribunal decisions available during the relevant period supported that understanding. As the demand had been raised by invoking the extended period, it was treated as appearing time-barred. On that basis, pre-deposit of the adjudged dues was waived and collection was stayed pending appeal.

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Issues: Whether the demand of service tax for the period prior to the amendment to the exemption notification was liable to be treated as time-barred in view of the assessee's bona fide belief that computer training was exempt, and whether pre-deposit of the adjudged dues should be waived pending appeal.

Analysis: The exemption under Notification No. 24/04-ST dated 10.9.04 was relied upon for the relevant period, and the subsequent amendment by Notification No. 19/05-ST dated 7.6.05 was noted to have altered the position only from that date onward. The dispute before the Tribunal related to the period before the amendment. In that backdrop, and in light of the Tribunal decisions available during the relevant period supporting the assessee's understanding, the assessee's claim of bona fide belief was accepted for the limited purpose of limitation. Since the demand had been raised by invoking the extended period, the demand was held to appear time-barred.

Conclusion: The assessee succeeded on the issue of limitation for the purpose of stay, and pre-deposit of the dues was waived with stay on collection during pendency of the appeal.

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