Revenue neutrality and limitation barred service tax demand on CRS-related input services; extended period was not sustainable.

Service tax demand on CRS-related services was held unsustainable because the appellant had already discharged tax on the output air-transport service, so any tax paid under reverse charge would have been available as credit and the arrangement was revenue neutral. The extended limitation also could not be invoked, as the department was already aware of the relevant facts through an earlier show cause notice, the records and returns were maintained in the ordinary course, and no mala fide suppression was shown. The demand was therefore barred by limitation and the impugned order was set aside.

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Issues: Whether the demand of service tax on services received from CRS companies could survive in view of revenue neutrality and the bar of extended limitation.

Analysis: The appellant had already discharged service tax on its output service of transportation of passengers by air, and the disputed input service was directly connected with that output service. On that basis, the tax paid, if any, on reverse charge would have been available as credit, making the situation revenue neutral. The record also showed that the department was already aware of the relevant facts through an earlier show cause notice, and there was no basis to sustain invocation of the extended period. The appellant's returns and business records were maintained in the ordinary course, and no mala fide or deliberate suppression was made out.

Conclusion: The demand was barred by limitation and was unsustainable on the ground of revenue neutrality. The appeal was therefore allowed and the impugned order was set aside.

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