Extended limitation for service tax demand fails where fraud or suppression is not established, sustaining deletion of demand and penalty.

The extended period of limitation for confirming a service tax demand could not be invoked where the ingredients for penalty under section 78 were not established. The absence of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax meant the necessary factual foundation for extended limitation was lacking. Since that finding was not challenged, it could not be used to sustain the demand beyond the normal limitation period. The demand and related penalty were therefore not enforceable, and the order setting them aside was sustained.

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Issues: Whether the extended period of limitation for confirming the service tax demand was attracted when the ingredients for penalty under section 78 were not established and the assessee was found not to have acted with fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade tax.

Analysis: The finding that section 78 was not attracted meant that the essential ingredients of fraud, collusion, wilful misstatement, suppression of facts or intentional contravention were absent. In the absence of any challenge to that finding, the same factual foundation could not support invocation of the extended limitation period for confirming the demand.

Conclusion: The extended period of limitation was not available against the assessee, and the impugned order setting aside the demand and related penalty was sustained.

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