Extended limitation and suppression allegations required to sustain service tax demand and penalties under rent-a-cab service

Service tax demand and related penalties were found unsustainable where the show-cause notice did not allege wilful suppression of facts or invoke the extended period of limitation under Section 73 of the Finance Act, 1994. Although the assessee was treated as having provided taxable rent-a-cab scheme operator service and the exemption under Notification No. 3/99-ST was applicable only up to 31.3.2000, the record did not support the ingredient necessary to sustain the longer limitation period. On that basis, the demand and penalties were set aside in favour of the assessee.

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Issues: Whether the demand of service tax and consequential penalties were sustainable in the absence of an /allegation of wilful suppression or invocation of the extended period of limitation.

Analysis: The appellant was found to have rendered taxable service under the category of rent a cab scheme operator and the exemption under Notification No. 3/99-ST applied only up to 31.3.2000. However, the record did not support the finding of wilful suppression, and the show-cause notice was not shown to have alleged suppression of facts or invoked the larger period under Section 73 of the Finance Act, 1994. In these circumstances, the basis for sustaining the demand and the penalties failed.

Conclusion: The demand of service tax and the penalties were set aside and the appeal was allowed in favour of the assessee.

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