Extended period of limitation cannot be invoked when service tax already paid and accepted by department

CESTAT Kolkata held that extended period of limitation cannot be invoked when appellant had already paid service tax under Business Auxiliary Service category for 2008-09 and department accepted it without objection. Demand for 2008-2011 period was time-barred as show cause notice was issued in April 2013. For October 2011-March 2012, service tax paid under Business Auxiliary Service could be adjusted against Clearing and Forwarding Agency Service demand since rates were identical. Commission on high sea sales was not liable for service tax as it was already included in customs duty assessable value. Appeal allowed, demand set aside.

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Issues involved:
The issues involved in this case are the demand of Service Tax under the category of C&F agent service and the demand of Service Tax on commission received on high sea sales of goods.

Demand of Service Tax under C&F agent service:
The appellant, engaged in the manufacture of plywood and allied products, was issued a Show Cause Notice demanding Service Tax under the category of C&F agent service. The appellant contended that the demand raised by invoking the extended period of limitation was not sustainable as they had already paid Service Tax under the category of business auxiliary service for the same service during the period 2007-08. They argued that the Department changing its stand and raising a demand for the entire period from March 2008 to 2011-12 was unjustified. The appellant cited legal precedents, including the case of Nizam Sugar Factory v. Collector of C.Ex., A.P., to support their position that the extended period cannot be invoked when all facts are already known to the Department. The Tribunal agreed with the appellant, holding that the demand confirmed by invoking the extended period of limitation was not sustainable. The Tribunal also ordered the appropriation of the Service Tax paid by the appellant under the category of business auxiliary service against the demand of Service Tax under the category of C&F agent service for the same period, thereby relieving the appellant of further liability.

Demand of Service Tax on commission received on high sea sales of goods:
Regarding the demand of Service Tax on commission received on high sea sales of goods, the appellant argued that since the commission had already been included in the assessable value for the purpose of payment of Customs duty, no Service Tax could be demanded on this amount. The Tribunal observed that the commission/mark-up received by the appellant had indeed been included in the value for customs duty assessment. Citing legal precedents, including the case of Hyderabad Industries Ltd. v. Union of India, the Tribunal held that when the commission had already been included for customs duty purposes, Service Tax could not be charged on the same amount. Therefore, the Tribunal set aside the demand of Service Tax on the commission received on high sea sales of goods.

Conclusion:
As the demand of Service Tax was not sustained in both cases, the Tribunal did not find it necessary to impose interest or penalty on the appellant. The impugned order was set aside, and the appeal filed by the appellant was allowed.

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