Limitation and threshold exemption defeat service tax demand where receipts were earlier received and turnover stayed below taxable limit.

Service tax demand on receipts treated as received in 2008 failed because documentary evidence showed the amounts were actually received during 2004-05, making the notice time-barred; the demand on Rs. 14,78,589 was set aside. Receipts of Rs. 3,32,739 and Rs. 3,49,639 were also held not taxable because the assessee's turnover in the relevant financial years remained below the threshold limit of Rs. 10 lakhs. Consequential interest and penalties were therefore unsustainable, and the appeal succeeded in full.

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Issues: (i) Whether the demand of service tax on receipts of Rs. 14,78,589/- was time-barred because the amounts were received in 2004-05 and not on 10.05.2008. (ii) Whether service tax was payable on receipts of Rs. 3,32,739/- and Rs. 3,49,639/- when the turnover in the relevant financial years was below the threshold limit.

Issue (i): Whether the demand of service tax on receipts of Rs. 14,78,589/- was time-barred because the amounts were received in 2004-05 and not on 10.05.2008.

Analysis: The payment particulars and the performance certificate showed that the amount treated in the show cause notice as received on 10.05.2008 had in fact been received on different dates during 2004-05. The notice dated 30.09.2011 was therefore issued beyond the permissible period for those receipts.

Conclusion: The demand on Rs. 14,78,589/- was barred by limitation and was set aside.

Issue (ii): Whether service tax was payable on receipts of Rs. 3,32,739/- and Rs. 3,49,639/- when the turnover in the relevant financial years was below the threshold limit.

Analysis: The receipts of Rs. 3,32,739/- pertained to financial year 2006-07 and the receipt of Rs. 3,49,639/- pertained to financial year 2007-08. In both years, the turnover remained below the threshold limit of Rs. 10 lakhs, so the receipts were not taxable.

Conclusion: No service tax was payable on these receipts.

Final Conclusion: The service tax demand, together with the consequential interest and penalties, was unsustainable and the appeal succeeded in full.

Ratio Decidendi: Where receipts are shown, on the basis of documentary evidence, to fall in an earlier period beyond limitation or to remain within the applicable threshold exemption, service tax demand on such receipts cannot survive, and consequential interest and penalties also fail.

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