Extended limitation for service tax demands on bank-agent commission fails without suppression; penalties also deleted.

Extended limitation for service tax demand on commission earned as a bank agent could not be invoked absent any positive act of suppression with intent to evade tax, particularly where taxability depended on the scope of Business Auxiliary Service and transitional exemption notifications created interpretive confusion. Mere non-filing of returns and non-payment was insufficient on these facts. The penalties were unsustainable for the same reason and were deleted. Only the normal-period liability in one matter was sustained.

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Issues: Whether the extended period of limitation could be invoked for demanding service tax on commission received as an agent of the bank, and whether the penalties imposed were sustainable.

Analysis: The appellants were appointed by the bank to provide services in relation to loans and credit cards, and the dispute turned on the scope of Business Auxiliary Service during the relevant period. The definition of the service was amended from 10.09.2004 to include services provided on behalf of the client, and the contemporaneous exemption notifications created confusion regarding taxability for the earlier and transitional periods. The department did not establish any positive act of suppression with intent to evade tax. Mere non-filing of returns and non-payment, in a matter involving interpretation of the scope of tax liability, was held insufficient to sustain invocation of the extended period. The penalties were also found to be unjustified on the same facts.

Conclusion: The demand for the extended period was set aside in all appeals, the penalties were deleted, and only the normal-period liability in ST/26/2009 was sustained.

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