2024 (6) TMI 508 - AT - Service Tax

Voluntary disclosure of non-payment prevents extended limitation period, making entire service tax demand time-barred

CESTAT Kolkata allowed the appeal and set aside the demand for service tax on GTA and business auxiliary services for 2007-08 to 2010-11. The appellant ... Levy of service tax - business auxiliary service - GTA Service - suppression of facts or not - extended period of limitation - interest and penalties - HELD THAT:- No action has been initiated by the Department on the letter dated 26.10.2007 wherein the information of non-payment of Service Tax was intimated by the appellant. But later, the Show Cause Notice was issued, on 15.10.2012, demanding Service Tax for the period 2007-08 to 2010-11, alleging that the appellant has suppressed the intimation about non-payment of Service Tax on GTA and business auxiliary service. It is found that suppression of fact with intention to evade payment of tax does not exist in this case. The appellant has categorically informed the Department about the non-payment of Service Tax vide letter dated 26.10.2007. On receipt of the letter, no action has been taken by the Department. In such circumstances, the demand of Service Tax by invoking the extended period of limitation is not sustainable. In the present case, the demand notice for the period from 2007-08 to 2010-2011 has been issued vide the Show Cause Notice dated 15.10.2012. Thus, the entire demand confirmed in the impugned order is barred by limitation of time. Accordingly, the demand confirmed in the impugned order is not sustainable on the ground of limitation. Interest and penalties - HELD THAT:- Since the demand itself is not sustainable, the question of demanding interest and imposing penalties does not arise. The impugned order is set aside - appeal allowed. Issues involved: The issues involved in this case are the demand of Service Tax under the category of 'business auxiliary service' and 'GTA Service', and the applicability of the extended period of limitation for demanding Service Tax.Demand of Service Tax under 'business auxiliary service': The appellant contended that they are exempt from Service Tax under Notification No. 13/2003-S.T. for business auxiliary services related to the sale or purchase of agricultural produce. The Department disallowed this exemption, arguing that it only applies to agricultural produce and not other goods. The appellant maintained that the entire commission received from foreign agents is for the export of raw cotton, hence no segregation is necessary. They argued that the demand based on this ground is not sustainable.Demand of Service Tax under 'GTA Service': The appellant claimed eligibility for exemption under Notification No. 40/2007-S.T. and Notification No. 41/2007-S.T., allowing refund of Service Tax paid on GTA Service. The Department denied this, stating that since the appellant had not paid Service Tax, they cannot claim the benefit of the notifications. The appellant argued that the demand is not sustainable as the exercise is revenue neutral.Applicability of extended period of limitation: The appellant asserted that the issue is time-barred as they had informed the Department about not paying Service Tax in a letter dated 26.10.2007. They contended that since there was no fraud or suppression of facts, the extended period of limitation cannot be invoked. They cited previous decisions to support their argument. The Tribunal found that the demand for the period 2007-08 to 2010-11 was issued beyond the limitation period, rendering the demand unsustainable.The Tribunal held that the demand of Service Tax was not sustainable due to the bar of limitation. As there was no intention to evade tax and the Department was informed about non-payment, the demand based on the extended period of limitation was rejected. Consequently, the appeal was allowed, and the impugned order was set aside with no interest or penalties imposed.