Regular return disclosure defeats suppression, while reimbursable expenses, abatement and input service credit cannot be denied on conjecture.

Regular disclosure in ST-3 and Cenvat returns negatives suppression, so extended limitation cannot be invoked without proof of concealment; the demand was therefore time-barred except for December 2005. Binding circulars governing service tax permitted exclusion of reimbursable expenses and 85% abatement on lump sum charges, so those additions to taxable value were unsustainable. Denial of input service credit was also unjustified because credit is available on tax paid input services and suspicion alone cannot displace the statutory entitlement. Penalties were set aside, with liability confined to the December 2005 period and corresponding interest.

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Issues: (i) Whether the extended period of limitation could be invoked on the facts disclosed in the service tax and Cenvat returns; (ii) Whether the disallowance of reimbursable expenses, 85% abatement on lump sum charges, and denial of input service credit were sustainable.

Issue (i): Whether the extended period of limitation could be invoked on the facts disclosed in the service tax and Cenvat returns.

Analysis: The appellant had filed ST-3 returns and Cenvat credit returns regularly. Once the relevant particulars were disclosed in the returns, the department was expected to verify them before alleging suppression. In the absence of any solid evidence showing concealment, the allegation of suppression was not established.

Conclusion: The extended period was not invocable, and the demand was time-barred except for the period of December 2005.

Issue (ii): Whether the disallowance of reimbursable expenses, 85% abatement on lump sum charges, and denial of input service credit were sustainable.

Analysis: The binding circular permitted exclusion of reimbursable expenses and allowed 85% deduction where lump sum service charges were involved. The record did not show that the appellant had not incurred the claimed reimbursements, and the department had not undertaken verification of the returns or supporting records. The denial of input service credit was also not supported by the rules, which allow credit of tax paid on input services, and suspicion alone could not justify denial.

Conclusion: The disallowance of reimbursable expenses and abatement was unsustainable, and the denial of input service credit was not justified; only the demand relating to December 2005 survived with interest, and the penalties were set aside.

Final Conclusion: The appeal succeeded substantially on limitation and merits, resulting in deletion of the impugned penalties and most of the demand, with liability confined to the December 2005 period and the corresponding interest.

Ratio Decidendi: Regular disclosure in statutory returns negatives suppression and extended limitation cannot be invoked without proof of concealment; reimbursable expenses and permitted abatements under the governing circular cannot be added to taxable value, and input service credit cannot be denied on conjecture when the statutory conditions are otherwise met.

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