2023 (8) TMI 350 - AT - Service Tax

Service tax demand on chartered accountant services time-barred as Tribunal rules in favor of appellant

The Tribunal held that the demand for service tax on chartered accountant services provided by the appellant as a sub-contractor was time-barred. The ... Limitation / time bar of demand - effect of prior show cause notice on invocation of extended limitation - bonafide belief based on Board Circular dated 31.10.1996 - service tax liability of sub contractor (as background)Limitation / time bar of demand - effect of prior show cause notice on invocation of extended limitation - bonafide belief based on Board Circular dated 31.10.1996 - Whether the service tax demand raised on the appellant is barred by limitation in view of earlier show cause proceedings and the Board circular. - HELD THAT: - The Tribunal found that the identical issue had been the subject-matter of earlier show cause proceedings in the appellant's own case, in which this Tribunal had set aside the demand on the ground of time bar and accepted that the appellant had a bonafide belief arising from Board Circular dated 31.10.1996 that sub contractors need not pay service tax when the main contractor discharged tax on gross value. Applying the legal principle reiterated by the Supreme Court in Nizam Sugars Factory (that where a show cause notice has been issued on a particular issue, an extended period cannot be invoked subsequently for the same issue), the Tribunal held that the department could not invoke limitation for the later period. The Tribunal therefore concluded that the demand for the relevant period was time barred notwithstanding that taxability on merits was not contested. [Paras 4, 5]Demand is barred by limitation and the impugned order is set aside; appeal allowed with consequential reliefs.Final Conclusion: The Tribunal allowed the appeal, holding the service tax demand for 2005 -2006 to be time barred in view of prior show cause proceedings and the Board circular that furnished a bonafide belief, and set aside the impugned order with consequential relief as per law. Issues involved: Whether the chartered accountant service provided by the appellant as a sub-contractor is liable to service tax and whether the demand of service tax is hit by limitation due to the issuance of show cause notices for the same service.Summary:The appellant, represented by Ms. Shrayashree T., did not contest the taxability of the service but argued strongly on the limitation issue. Referring to Circular No. F.No. 341/43/96- TRU, it was claimed that the appellant, as a sub-contractor, was not liable to pay service tax. The appellant's position was further supported by a larger bench decision in the case of Melange Developers Pvt. Ltd. The appellant emphasized that there was no suppression of fact on their part, and hence, the demand was time-barred.The Revenue, represented by Shri G. Kirupanandan, reiterated the findings of the impugned order without contesting the taxability on merit but opposing the limitation argument put forth by the appellant.Upon careful consideration, the Tribunal noted that the demand in the present case was similar to a previous case where the Tribunal had dropped the demand on limitation grounds. The Tribunal referred to the previous order which set aside the demand based on the timing of service provision and payment, as well as a circular exempting sub-contractors from paying service tax when the main contractor discharged the tax. The Tribunal also highlighted an exemption for management consultancy services during the relevant period, further supporting the decision to set aside the demand.The Tribunal observed that the issue had been raised earlier by the Revenue, indicating that the department was aware of the appellant's activities. Considering the relevant circular in force during the period in question, the Tribunal concluded that the appellant had a bona fide belief that they were not liable to pay service tax. Citing a Supreme Court decision, the Tribunal held that the demand was clearly hit by limitation, setting aside the impugned order and allowing the appeal with consequential relief.The judgment was pronounced in the open court on 03.08.2023.