2019 (1) TMI 1034 - AT - Service Tax

Service tax demand time-barred; penalties unwarranted due to lack of intent

The Tribunal held that the demand raised against the appellant for non-payment of service tax was barred by limitation. It was found that the appellant's ... Time Limitation - Non-payment of Service tax - contention of the department was that the appellants have realized charges for the services rendered from their clients but failed to collect and pay to the Government - Held that:- The credentials of the appellant have been squarely established as the appellants have sought the clarification well before hand. If the learned Commissioner entertains such a doubt in 2006, the appellant being a common man has all the more reason to be ignorant about the provisions of law in 1998. It is on record that the department has not replied to the clarification sought by the appellants - extended period cannot be invoked, more so, as the appellants were regularly filing ST-3 returns and have been discharging duty as per their understanding. SCN do not survive of limitation - impugned order is deserved to be set aside as far as the demand beyond normal period is concerned - the impugned order is modified to the extent that the demand of service tax is restricted to ₹ 95,905/-, which is to be appropriated from the deposit made by the appellants - appeal allowed in part. Issues:1. Whether the demand raised by the department against the appellant for non-payment of service tax is barred by limitation.2. Whether the extended period can be invoked in the case of the appellant.3. Whether penalties can be imposed on the appellant for non-payment of service tax.4. Whether the appellant's request for clarification from the Commissioner regarding non-payment of service tax from customers affects the liability of the appellant.5. Whether the appellant's regular filing of ST-3 returns and discharge of duty as per their understanding affects the invocation of the extended period.Analysis:Issue 1:The appellant contended that the entire issue is time-barred as the show-cause notice was issued beyond the limitation period. The appellant had sought clarification from the Commissioner regarding the difficulty in realizing service tax from customers. The Commissioner also sought clarification from CBEC, indicating a lack of clarity on the issue. The appellant argued that since the department did not respond to their clarification and they were regularly filing ST-3 returns, the extended period cannot be invoked.Issue 2:The appellant argued that the demand for the period beyond 5 years was not valid, and for the remaining period, the extended period should not be invoked. The appellant had paid a portion of the demanded amount and contended that no penalty should be imposed as there was no intent to evade payment of duty.Issue 3:The appellant's counsel emphasized that penalties should not be imposed as there was no positive act of suppression on the appellant's part. The appellant had deposited certain amounts, and it was argued that penalties were not warranted.Issue 4:The appellant had sought clarification from the Commissioner regarding non-payment of service tax by some customers. The appellant informed the authority about the situation and requested guidance on how to proceed with defaulting units. The Commissioner, in a similar vein, sought clarification from CBEC. The Tribunal found that the appellant's request for clarification and the lack of response from the department indicated that the extended period could not be invoked.Issue 5:The Tribunal noted that the appellant had sought clarification from the Commissioner, regularly filed ST-3 returns, and discharged duty as per their understanding. This, coupled with the lack of response to the appellant's clarification request, led to the conclusion that the show-cause notice and the original order did not survive on limitation. The demand was restricted to a specific period, and penalties were deemed unwarranted due to the lack of intent to evade payment.In conclusion, the Tribunal modified the impugned order, restricting the demand of service tax and setting aside the remaining demands and penalties. The decision was pronounced in open court on 14/12/2018.