Contract services pre-service tax not taxable post-implementation date. Time-barred demand on commission service. Appellant not liable for post-01.07.2003 franchise service tax.

The Rajasthan High Court held that services provided under a contract before the levy of service tax should not attract service tax post the implementation date. The Tribunal found the demand on commission service time-barred due to limitation, as the appellant was not liable for service tax on franchise service post 01.07.2003. The appeal was allowed based on these findings, with legal precedent from cited judgments ensuring a fair decision.

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Issues:
1. Liability to pay service tax on franchise service post 01.07.2003.
2. Time-barred demand on commission service under Business Auxiliary Service.

Analysis:

Issue 1: Liability to pay service tax on franchise service post 01.07.2003
The appellant argued that since the contract and payment for the franchise service were made before the service tax levy on 01.07.2003, they should not be liable for service tax post that date. The Hon'ble Rajasthan High Court held that services provided under a contract before the levy of service tax should not attract service tax post the implementation date. This interpretation was supported by the Chennai Bench of the Tribunal in a similar case. Therefore, the appellant was not liable to pay service tax on the franchise service post 01.07.2003.

Issue 2: Time-barred demand on commission service under Business Auxiliary Service
Regarding the demand on commission service for providing table space to a financial institution, the appellant contended that the issue was under dispute and previous judgments favored the assessee. However, a subsequent decision by the Larger Bench in the case of Pagariya Auto Center held that such commission received would be liable to service tax. Despite the initial ambiguity in the interpretation of the law, the demand was considered time-barred due to the extended period being hit by limitation. The Tribunal found that the suppression of fact could not be alleged against the appellant. Therefore, the demand on commission service was not sustainable.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal based on the findings that the appellant was not liable for service tax on franchise service post 01.07.2003 and that the demand on commission service was time-barred. The judgments cited by both parties were crucial in establishing the legal precedent for the issues at hand, ensuring a fair and just decision in the matter.

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