Limitation on service tax demand: bona fide valuation dispute prevented invocation of the extended period.

Service tax demand for photography services was held time-barred, as the dispute turned only on limitation and the extended period could not be invoked. The assessee had filed returns and paid tax, while the only controversy concerned exclusion of the cost of goods and materials from taxable value. Earlier Tribunal rulings and a departmental circular showed divergent views on includibility, supporting a bona fide belief and negating any allegation of wilful suppression or mala fide default. On that basis, the demand for the earlier period was barred by limitation and consequential relief followed.

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Issues: Whether the demand of service tax for the period 2003 to 2006 was barred by limitation and whether the extended period could be invoked.

Analysis: The liability on merits was not pursued, the controversy being confined to limitation. The record showed that the assessee had been filing returns and paying tax on photography services, while the dispute related only to exclusion of the cost of goods and materials from the taxable value. Earlier Tribunal decisions and the departmental circular reflected divergent views on the issue, supporting a bona fide belief that such cost was not includible. In these circumstances, there was no material to establish mala fide suppression or wilful default so as to justify invocation of the extended period.

Conclusion: The demand raised in 2009 for the period 2003 to 2006 was held to be barred by limitation, and the appeal was allowed with consequential relief.

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