Service tax demand fails due to limitation as no suppression found in CENVAT credit disclosure

The CESTAT Allahabad ruled in favor of the appellant in a service tax recovery case involving renting of immovable property services. The appellant had claimed exemption under Notification 6/2005-ST while taking CENVAT credit, which the department discovered through ST-3 returns filed for April-September 2008. The tribunal found no suppression of facts since the appellant had disclosed the CENVAT credit details in their returns, which were acknowledged by department officials. The show cause notice invoking extended limitation period for 2006-07 was held bad in law due to lack of suppression grounds. The demand was barred by limitation, and penalties under Sections 77-78 were set aside. Appeal allowed.

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Issues Involved:

1. Demand of service tax under Section 73(1) of the Finance Act, 1994.
2. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.
3. Admissibility of exemption under Notification No. 6/2005-ST.
4. Applicability of extended period of limitation.

Summary:

1. Demand of Service Tax:
The appellant, registered as a manufacturer and service provider, failed to register under "Renting of Immovable Property Services" and did not discharge service tax liability for the period from 01.06.2007 to November 2008. The authorities confirmed a demand of Rs. 1,27,357 under Section 73(1) of the Finance Act, 1994, along with applicable interest under Section 75.

2. Imposition of Penalties:
The authorities imposed penalties of Rs. 1,27,357 under Section 78 and Rs. 5000 under Section 77 of the Finance Act, 1994. The appellant argued that they were under a bona fide belief that no service tax was payable and had disclosed all details in their ST-3 returns. However, the authorities held that the non-payment was not under a bona fide belief, citing extensive correspondence from the department.

3. Admissibility of Exemption:
The appellant claimed exemption under Notification No. 6/2005-ST, arguing non-availment of CENVAT credit on input services. The authorities denied this exemption, noting that the appellant had availed CENVAT credit, which was reflected in their ST-3 returns. The exemption under Notification No. 6/2005-ST was not available as per its conditions if CENVAT credit was availed.

4. Applicability of Extended Period of Limitation:
The authorities invoked the extended period of limitation, alleging suppression of facts. However, the Tribunal found that the appellant had disclosed the CENVAT credit details in their ST-3 returns, and the department was aware of this. The Tribunal held that the demand for the period 2006-07 was barred by limitation, as no grounds for alleging suppression were provided in the show cause notice or orders.

Conclusion:
The Tribunal allowed the appeal, setting aside the demand and penalties, holding that the extended period of limitation was not applicable. The issue of admissibility of the exemption under Notification No. 6/2005-ST was not addressed on merits due to the limitation ruling.

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