Service tax limitation turns on genuine taxability doubt; later clarification barred extended period for car loan marketing commissions.

Commission-based car loan marketing was treated as Business Auxiliary Service, but genuine contemporaneous doubt over taxability, later clarified by circular, meant earlier non-payment could not be treated as suppression with intent to evade tax. The extended period of limitation was therefore unavailable, and the demand was held time-barred and unsustainable. The underlying service classification remained relevant, but it did not justify invoking extended limitation in the absence of wilful suppression.

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Issues: Whether the demand of service tax on the appellant's commission-based car loan marketing activity was barred by limitation and whether the extended period could be invoked on the ground of suppression.

Analysis: The activity of sourcing customers for banks and earning commission for promoting their lending services was treated as falling within Business Auxiliary Service under Section 65(19) of the Finance Act, 1994, as introduced by Notification No. 7/2003 dated 20.05.2003 with effect from 01.07.2003. However, the record showed that for the relevant period there was acknowledged confusion in the field regarding the coverage of such financial marketing activities, which was later clarified by Circular No. 87/05/2006-ST dated 06.11.2006. In these circumstances, non-payment of tax for the earlier period could not be characterised as suppression with intent to evade tax, and the extended period of limitation was not available.

Conclusion: The demand was held to be time-barred and unsustainable; the invocation of the extended period was rejected.

Final Conclusion: The impugned orders were set aside and the appeal was allowed because the demand could not survive limitation, notwithstanding the underlying service classification.

Ratio Decidendi: Where the taxability of an activity was clouded by genuine contemporaneous doubt later clarified by the department, mere non-payment for the earlier period does not amount to suppression with intent to evade tax so as to justify the extended period of limitation.

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