Service tax demand on motor vehicle expenses failed for lack of evidence, and extended limitation was held unjustified.

Service tax could not be demanded on motor car expenses and vehicle hire charges as rent-a-cab service under reverse charge because the disputed ledgers reflected fuel, toll, parking, repair and staff reimbursement, and the department produced no evidence linking the entries to a taxable service or identifying the supplier. The extended limitation period was also unjustified, as the notice was issued after the relevant period without material showing suppression of facts by the assessee. On these findings, the demand, together with consequential interest and penalty, was held unsustainable and relief followed.

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Issues: (i) Whether service tax could be demanded on the amounts reflected under motor car expenses and vehicle hire charges by treating them as rent-a-cab service under reverse charge mechanism. (ii) Whether invocation of the extended period of limitation was justified.

Issue (i): Whether service tax could be demanded on the amounts reflected under motor car expenses and vehicle hire charges by treating them as rent-a-cab service under reverse charge mechanism.

Analysis: The disputed ledgers were examined and found to reflect miscellaneous motor vehicle expenses such as fuel, toll, parking, repair and staff reimbursement, while vehicle hire charges related to GTA services already accounted for and taxed in the returns. The department did not produce contrary evidence to correlate the impugned entries with rent-a-cab service, nor did it identify the supplier of the alleged service. In these circumstances, the demand proceeded on assumption and presumption and the deeming approach adopted in adjudication could not be sustained.

Conclusion: The demand on this issue was set aside in favour of the assessee.

Issue (ii): Whether invocation of the extended period of limitation was justified.

Analysis: The demand related to the period 2012-13 to 2015-16, whereas the notice was issued in 2018. No adequate explanation was offered for the delay, and the record did not support suppression of facts by the assessee. The extended limitation period therefore lacked justification.

Conclusion: The extended period of limitation was wrongly invoked in favour of the assessee.

Final Conclusion: The service tax demand, along with the consequential interest and penalty, was unsustainable and the appeal succeeded with consequential relief.

Ratio Decidendi: A demand of service tax cannot be sustained on mere assumption without evidence correlating the impugned expenditure to the taxable service, and the extended period of limitation cannot be invoked absent material showing suppression of facts.

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