Extended limitation unavailable where facts were already known to Revenue; service tax recomputation must allow cum-duty benefit and drop penalty.

Where Revenue already had knowledge of the relevant facts through audit findings, the extended period of limitation could not be invoked and recovery was confined to the normal period. For service tax computation, cum-duty benefit was required to be applied while recalculating the liability for that normal period. Penalty under Section 78 could not survive once the extended limitation period and the related demand for the disputed period failed, so the penalty was set aside. The matter was remanded for recomputation of service tax only within the normal limitation period, with consequential relief in valuation and penalty.

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Issues: (i) whether the extended period of limitation could be invoked; (ii) whether cum-duty benefit was to be extended while computing service tax liability; (iii) whether penalty under Section 78 could be sustained.

Issue (i): whether the extended period of limitation could be invoked.

Analysis: The demand was based on audit findings already within the knowledge of Revenue in November 2012, whereas the show cause notice was issued much later. In these circumstances, the longer limitation period was not available for recovery beyond the normal period.

Conclusion: The extended period of limitation was not invocable.

Issue (ii): whether cum-duty benefit was to be extended while computing service tax liability.

Analysis: Since the liability was required to be worked out only for the normal period, the computation had to account for cum-duty benefit while determining the tax payable.

Conclusion: Cum-duty benefit was directed to be extended.

Issue (iii): whether penalty under Section 78 could be sustained.

Analysis: Penalty under Section 78 depended upon the availability of the extended period and the related demand for the disputed period. Once the extended period was held to be unavailable, the foundation for such penalty did not survive.

Conclusion: Penalty under Section 78 was not leviable.

Final Conclusion: The matter was sent back for recomputation of service tax liability for the normal period alone, with cum-duty benefit, and without penalty under Section 78.

Ratio Decidendi: Where the Revenue already had knowledge of the relevant facts, the extended period of limitation cannot be invoked, and the demand must be restricted to the normal period with consequential relief in computation and penalty.

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