Reverse charge liability and extended limitation failed where material evidence of tax payment was ignored and suppression was not proved.

Reverse charge liability for manpower recruitment and supply services shifted from shared payment to 100% payment by the service recipient from 01.04.2015, but the commentary notes that the authorities ignored challans and other material showing continued payment through the service provider, making confirmation of the demand on merits unsustainable. It also explains that the extended limitation period could not be invoked where the department failed to prove suppression or intent to evade, particularly when the record did not show deliberate non-payment and the show cause notice was issued after the relevant period. The demand and penalty were therefore not sustainable.

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Issues: (i) Whether, after the amendment to the reverse charge notification with effect from 01.04.2015, the appellant was liable to pay 100% of the service tax on manpower recruitment and supply services for the disputed period. (ii) Whether the show cause notice invoking the extended period of limitation was time-barred.

Issue (i): Whether, after the amendment to the reverse charge notification with effect from 01.04.2015, the appellant was liable to pay 100% of the service tax on manpower recruitment and supply services for the disputed period.

Analysis: The liability structure under the notification changed from 75% and 25% sharing to full liability on the service recipient from 01.04.2015. The appellant continued paying on the earlier pattern, and the record showed challans indicating that the remaining portion was also being paid by the service provider during the disputed period. The authorities below did not deal with this material evidence and proceeded only on the footing that the amended notification made the recipient liable for 100% payment.

Conclusion: The confirmation of the demand on merits was unsustainable; the appellant succeeded on this issue.

Issue (ii): Whether the show cause notice invoking the extended period of limitation was time-barred.

Analysis: The change in liability took effect from 01.04.2015, while the demand covered April 2015 to December 2015 and the show cause notice was issued on 31.03.2017. The absence of material showing deliberate non-payment, coupled with the evidence of tax payment through the service provider and the failure of the department to discharge the burden of proving suppression or intent to evade, meant that the extended period could not be invoked.

Conclusion: The show cause notice was barred by limitation and the extended period of limitation was not available to the department.

Final Conclusion: The order below was set aside and the appeal was allowed, with the demand and penalty not surviving.

Ratio Decidendi: When the department fails to consider material evidence showing payment of the tax liability and does not establish suppression or intent to evade, the extended period of limitation cannot be invoked under Section 73 of the Central Excise Act, 1944.

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