Service tax limitation and appropriation of investigation deposit: notice within normal period upheld, with deposit adjusted against confirmed demand.

A service tax demand was held not to be barred by limitation because the show cause notice was issued within the normal period of 18 months from the relevant dates, notwithstanding a typographical error in the order's return-date recording. The objection on limitation was rejected, and the demand with related penalty was maintained. An amount deposited during investigation, which had been proposed for adjustment in the notice, was required to be appropriated against the confirmed demand. The appeal succeeded only to that limited extent, while the substantive confirmation of demand, interest, and remaining penalties was upheld.

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Issues: (i) whether any part of the service tax demand was barred by limitation under the normal period; (ii) whether the amount of Rs. 1,50,00,000 deposited during investigation was liable to be appropriated against the confirmed demand.

Issue (i): Whether any part of the service tax demand was barred by limitation under the normal period

Analysis: The notice covered the relevant periods within 18 months from the respective relevant dates. The recording in the impugned order regarding the date and period of filing of the return contained a typographical error, but the correct dates showed that the show cause notice was issued within the normal limitation period. Since no part of the demand was time-barred, there was no basis for reducing the demand or the penalty on limitation grounds.

Conclusion: The objection based on limitation was rejected and the demand and related penalty were upheld.

Issue (ii): Whether the amount of Rs. 1,50,00,000 deposited during investigation was liable to be appropriated against the confirmed demand

Analysis: The amount had admittedly been deposited during investigation and its appropriation had been proposed in the show cause notice. The impugned order, however, failed to appropriate that amount against the confirmed demand, though it ought to have been so adjusted.

Conclusion: The deposited amount was directed to be appropriated against the confirmed demand.

Final Conclusion: The appeal succeeded only to the limited extent of directing appropriation of the amount deposited during investigation, while the substantive confirmation of demand, interest, and remaining penalties was maintained.

Ratio Decidendi: A demand is not time-barred where the notice is issued within the applicable normal limitation period, and any amount admittedly deposited during investigation should be appropriated against the confirmed liability when so proposed.

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