Debatable taxability bars extended limitation and penalty where distributor commission demand is confined to the normal period.

Where the taxability of the distributor's commission was debatable and prior Tribunal decisions had already covered the merits, the extended period of limitation could not be invoked because the issue involved scope for doubt. The demand was therefore confined to the normal limitation period, and no penalty was warranted on that basis. The impugned order was set aside and the matter remanded to the Original Adjudicating Authority to recompute the demand within the normal period only, without imposing penalty.

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Issues: Whether the service tax demand in respect of the distributor's commission could be sustained beyond the normal limitation period and whether penalty was leviable.

Analysis: The demand on merits was treated as covered by prior Tribunal decisions, but the controlling question in this order was limitation. The Tribunal applied the principle that where the issue is debatable and there was scope for doubt, the extended period of limitation is not invokable. It therefore held that demand could be restricted only to the normal limitation period. The Tribunal also found no justification for imposition of penalty.

Conclusion: The impugned order was set aside and the matter was remanded to the Original Adjudicating Authority to confine the demand to the normal period, with no penalty sustainable against the appellants.

Ratio Decidendi: When the taxability issue is arguable and there is scope for doubt, the extended period of limitation cannot be invoked and demand can be confined only to the normal limitation period; penalty is not warranted on that basis.

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