Cancellation charges and extended limitation in service tax disputes: cancelled booth bookings were non-taxable, while disclosure defeated suppression.

Cancellation charges retained on cancellation of booth bookings were treated as compensation for inconvenience, not as consideration for Business Exhibition Services, because no booth was ultimately rented out and no service was provided against the cancelled booking. Penal amounts recovered for violation of booth size were, however, linked to the extra space actually used and were treated as taxable consideration for additional service value. On limitation, disclosure of the disputed amounts in the balance sheet and absence of material showing mala fide suppression meant the extended period could not be invoked. The demand, interest and penalty were therefore held time-barred.

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Issues: (i) Whether cancellation charges retained on cancellation of booked booths formed consideration for Business Exhibition Services and were liable to service tax; (ii) whether penal amounts recovered for violation of booth size were liable to service tax; (iii) whether invocation of the extended period of limitation was sustainable.

Issue (i): Whether cancellation charges retained on cancellation of booked booths formed consideration for Business Exhibition Services and were liable to service tax.

Analysis: The amounts were retained from advance booking money when the booth booking was cancelled and no booth was ultimately rented out. Since no service was ultimately provided against the cancelled booking and the amounts represented compensation for inconvenience caused by cancellation, they could not be treated as consideration for Business Exhibition Services.

Conclusion: The cancellation charges were not liable to service tax and the issue was decided in favour of the assessee.

Issue (ii): Whether penal amounts recovered for violation of booth size were liable to service tax.

Analysis: The so-called penalty was recovered because the booth occupant availed extra space by increasing the booth height. The amount was thus connected with the extra space provided and, irrespective of nomenclature, represented consideration for additional taxable service value.

Conclusion: The penal amounts were liable to service tax and this issue was decided against the assessee.

Issue (iii): Whether invocation of the extended period of limitation was sustainable.

Analysis: The disputed amounts were reflected in the balance sheet and there was no positive material showing mala fide suppression. In these circumstances, the demand could not be extended beyond the normal limitation period.

Conclusion: The extended period of limitation was not available and the demand was time-barred in favour of the assessee.

Final Conclusion: The service tax demand, interest and penalty could not be sustained in view of the time bar, and the assessee obtained full relief.

Ratio Decidendi: Amounts retained on cancellation of a booking are not taxable as consideration for the underlying service where no service is ultimately provided, and the extended limitation period cannot be invoked in the absence of evidence of suppression when the relevant facts are disclosed in the balance sheet.

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