Service Tax exemption and limitation on construction services to Government restricted demand to normal period; no penalty imposed.

Construction services rendered to the State Government were not entitled to Service Tax exemption for the period governed by the post-withdrawal regime, because the later notification could not override the withdrawal of exemption already effected by Notification No. 06/2015-S.T.; the demand survived on merits to that extent. The extended period of limitation was not invokable because the taxability issue was in public domain and the record showed confusion rather than suppression or other ingredients required for extended limitation; the demand was confined to the normal limitation period. No penalty was leviable in the circumstances, given the limitation finding and the partial survival of the demand.

---

---

Issues: (i) Whether the appellant was entitled to exemption from Service Tax for construction services rendered to the State Government under the relevant exemption notifications and subsequent amendment; (ii) Whether the extended period of limitation could be invoked for the show cause notice issued for the disputed period; (iii) Whether penalty was leviable.

Issue (i): Whether the appellant was entitled to exemption from Service Tax for construction services rendered to the State Government under the relevant exemption notifications and subsequent amendment.

Analysis: The exemption under Notification No. 25/2012-S.T. initially covered specified construction services provided to the Government and governmental authorities. The appellant relied on Notification No. 09/2016-S.T. to contend that the later amendment operated retrospectively, but the relevant exemption position had already changed by Notification No. 06/2015-S.T. The later notification could not be applied in the manner suggested by the appellant to override the applicable withdrawal of exemption.

Conclusion: The appellant was not entitled to succeed on merits against the tax demand for the period covered by the applicable post-withdrawal regime.

Issue (ii): Whether the extended period of limitation could be invoked for the show cause notice issued for the disputed period.

Analysis: The record showed confusion regarding taxability of services rendered to the Government, and the relevant activity and documents were in the public domain. On those facts, the ingredients necessary to justify invocation of the extended limitation period were absent. The notice, though issued for a long period, could sustain only to the extent permissible within the normal period of limitation.

Conclusion: The extended period of limitation was not invokable and the demand for the extended period was set aside.

Issue (iii): Whether penalty was leviable.

Analysis: In the factual setting where the dispute involved taxability and limitation controversy, and part of the demand itself did not survive, the case did not warrant penal action.

Conclusion: No penalty was imposable.

Final Conclusion: The tax demand survived only to the extent it fell within the normal limitation period, while the portion based on the extended period was set aside and no penalty was sustained.

Ratio Decidendi: Where taxability is governed by a withdrawal of exemption and the assessee fails on merits, the demand may still be restricted to the normal limitation period if the necessary elements for invoking the extended period are not established, and penalty may be denied on the facts of the case.

---