Conflicting judicial views on renting of immovable property defeated extended limitation and rendered the service tax demand time-barred.

Conflicting judicial views on the taxability of renting of immovable property under the Finance Act, 1994 supported a bona fide belief, so the ingredients for invoking the extended period of limitation were not satisfied. As a result, the service tax demand was time-barred and could not be sustained even for the normal period. The analysis turned on limitation rather than on any substantive finding against the assessee, and the assessee succeeded on the limitation defence.

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Issues: Whether the demand of service tax on renting of immovable property was barred by limitation, and whether the extended period of limitation could be invoked where conflicting judicial views existed.

Analysis: The liability arose in the context of renting of immovable property service under Section 65(105)(zzzz) of the Finance Act, 1994. The period in dispute was governed by a legal regime where there were conflicting views on taxability, including challenge to the levy and later retrospective validation. In such a situation, adoption of a view favourable to the assessee supported a bona fide belief, and the ingredients necessary for invoking the extended period were not made out. Once the extended period was unavailable, the demand could not be sustained even for the normal period.

Conclusion: The demand was held to be time-barred, the extended period was not invocable, and the assessee succeeded on limitation.

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