Extended limitation in service tax disputes requires proof of suppression; notice failed where main contractor had already paid tax.

Extended limitation for a show cause notice on sub-contractor work contract service tax was held unsustainable where the tax on the same consideration had already been paid by the main contractor. In the prevailing period, conflicting views existed on whether a sub-contractor had a separate tax liability once the principal contractor discharged the tax, and the later Larger Bench position settled the issue only subsequently. On that record, there was no material to establish fraud, wilful misstatement, suppression of facts, or intent to evade tax, and the Department failed to discharge the burden required for invoking the extended period. The notice was therefore barred by limitation and the demand did not survive.

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Issues: Whether the show cause notice invoking the extended period of limitation was barred by time in a case where the service tax on the value of work contract services received by the sub-contractor had already been paid by the main contractor.

Analysis: The liability of sub-contractors had been the subject of conflicting views during the relevant period, with several decisions taking the view that no separate tax was payable once the main contractor had discharged the tax, and the later Larger Bench ruling settling the position only subsequently. In that background, and since the tax on the very consideration involved had already been paid to the Government by the main contractor, the record did not justify an inference of fraud, wilful misstatement, suppression of facts, or any intent to evade tax. The Department, which bore the burden to establish the ingredients necessary for invoking the extended period, failed to show any positive evidence of evasion.

Conclusion: The show cause notice was barred by limitation and invocation of the extended period was not sustainable. The appeal was allowed and the demand did not survive.

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