2015 (8) TMI 596 - AT - Service Tax

Tribunal sets aside service tax demand pre-2006, deems notice time-barred, nullifies interest and penalties

National Aviation Co. of India Ltd. Versus Commissioner of Service Tax, Mumbai

The tribunal allowed the appeal, setting aside the demand for service tax on amounts collected prior to 01/05/2006 for services rendered after that date. ... Services of transportation of passengers - Advance receive for journey before levy of service tax i.e. 1/5/2006 - Suppression of facts - Bonafide belief - Bar of limitation - Assessee contends that that they were under the bonafide impression that the service tax liability may not arise on an amount received as advance for the journeys to be conducted after 01/05/2006 - Held that:- It can be noticed from the letter received by the appellant from the office of the Assistant Commissioner, service tax specific details were called for and such details were given. In our view the appellant had volunteered the information as soon it was sought by the departmental authorities. In our view the details which were not sought could not have been supplied by the appellant Receipts of the payments prior to the date of journey recorded in accounts, as is the industry practice. If the authorities were claiming that the appellant has suppressed the details, they could have asked for the correct details from the appellants, which they did not do so. Further, we find that the post communication dated 06/08/2006, which is referred by the adjudicating authority, it was also in the knowledge of the department that a clarification has been issued, despite such clarification, there seems to be no follow up by the department like seeking for the details or demand of tax from the appellants, in the absence of any positive action of in suppressing the details from the department, we find that tax liability which is being worked out by invoking the extended period is not correct - demands raised on the appellant are blatantly hit by limitation and we set aside the impugned order on the question of limitation. Since we have set aside the demands, the question of interest and penalties does not arise and they are also set aside. - Decided in favour of assessee. Issues Involved:1. Taxability of services provided prior to 01/05/2006.2. Limitation period for the issuance of the show-cause notice.3. Applicability of the Board's Circular No. 334/3/2010-TRU.4. Invocation of the extended period for demand.5. Imposition of interest and penalties.Analysis of the Judgment:1. Taxability of Services Provided Prior to 01/05/2006:The core issue was whether the appellant was liable to pay service tax on amounts collected prior to 01/05/2006 for services rendered after this date. The appellant argued that since the services were not taxable before 01/05/2006, the amounts collected in advance should not attract service tax. The adjudicating authority, however, confirmed the demand for service tax on these amounts, stating that the services were rendered after 01/05/2006, when they became taxable.2. Limitation Period for the Issuance of the Show-Cause Notice:The appellant contended that the show-cause notice issued on 10/03/2010 was time-barred, as the department was aware of the details regarding the amounts collected prior to 01/05/2006 through a letter dated 10/11/2006. The appellant had provided the requested information by 14/03/2007. The tribunal found that the show-cause notice was indeed hit by limitation, as the department did not act on the information provided in 2007 and only issued the notice in 2010.3. Applicability of the Board's Circular No. 334/3/2010-TRU:The appellant relied on the Board's Circular No. 334/3/2010-TRU dated 01/07/2010, which exempted amounts received as advance for flights to be taken after 01/10/2010. The tribunal, however, found that this circular was not applicable to the case at hand, as it pertained to a different period and notification.4. Invocation of the Extended Period for Demand:The adjudicating authority invoked the extended period for demand, alleging suppression of facts by the appellant. The tribunal disagreed, citing the appellant's bona fide conduct in providing information when requested and the lack of follow-up by the department. The tribunal referenced the Supreme Court's judgment in the case of Uniworth Textiles Ltd., emphasizing that the burden of proving mala fide conduct lies with the department, which failed to do so in this case.5. Imposition of Interest and Penalties:Given that the tribunal set aside the demand on the grounds of limitation, it also nullified the imposition of interest and penalties. The tribunal concluded that since the demand itself was not sustainable, the associated interest and penalties could not be imposed.Conclusion:The tribunal set aside the impugned order on the grounds of limitation and allowed the appeal with consequential relief. The demands raised were found to be time-barred, and thus, the question of interest and penalties did not arise.