Limitation bars extended tax demand where bona fide belief and prior clarification supported non-inclusion of material cost in service value.

The extended period of limitation could not be invoked where the assessee held a bona fide belief, supported by earlier Tribunal views and administrative clarification, that the value of material used in photographic services was not includible in taxable value. Although the merits were covered against the assessee by Larger Bench authority, the surviving issue was limitation, and the demand raised beyond the normal period was time barred. Because the demand failed on limitation, the connected penalty also could not survive.

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Issues: Whether the demand for the extended period was barred by limitation in view of the assessee's bona fide belief that the value of material used in providing photographic services was not includible in the taxable value.

Analysis: The issue on merits stood covered against the assessee by the Larger Bench decision, but the only surviving controversy was limitation. The record showed that during the relevant period there were earlier Tribunal views and administrative clarification supporting the assessee's stand on non-inclusion of material cost, giving rise to a bona fide belief. In such circumstances, the extended period could not be invoked and the demand raised beyond the normal period was time barred. As the demand failed on limitation, the connected penalty also could not survive.

Conclusion: The demand beyond the normal period of limitation was held to be time barred and the appeal was allowed with consequential relief.

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