CESTAT sets aside Rs. 1.73 crore service tax demand on limitation grounds for amusement park operator

CESTAT Kolkata allowed the appeal, setting aside the total confirmed demand of Rs. 1,73,60,105/- on limitation grounds. The appellant operated motor vehicle servicing and amusement park services from different locations. The tribunal held that amusement park services became taxable only from 1.6.2015 after amendment to the Negative List under Section 66D. Revenue failed to establish suppression, and the appellant's bonafide belief of exemption was accepted. The demand for CENVAT credit reversal of Rs. 72,94,797/- was set aside both on merits and limitation. Short payment demands for repairs/maintenance and manpower services were also time-barred without proof of suppression.

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Issues Involved:
1. Demand for CENVAT Credit on common input services.
2. Service Tax demand for running an Amusement Park.
3. Short payment of Service Tax on Repairs and Maintenance of motor vehicles.
4. Service Tax demand on Manpower services.
5. Invocation of extended period for issuing Show Cause Notice.

Detailed Analysis:

1. Demand for CENVAT Credit on Common Input Services:
The appellant was accused of taking CENVAT Credit for commonly used input services without maintaining separate accounts. A demand of Rs.72,94,797/- was made on this basis. The appellant argued that they maintained separate accounts for their vehicle repair and amusement park activities, which are located 100 km apart. They claimed they did not take CENVAT Credit for services used at the amusement park. The Tribunal found that the demand was calculated based on the total turnover of exempted services, which is not justified. Citing case laws, it was held that the department cannot directly demand reversal at a fixed percentage of exempted turnover without allowing proportionate reversal. The Tribunal set aside the demand both on merits and on account of time bar.

2. Service Tax Demand for Running an Amusement Park:
The appellant argued that the amusement park services were exempt under Section 66D(j) until 1.6.2015, and they believed they were still exempt under Section 66D(a) as services by the Government or a local authority. The Tribunal found that the amusement park was not run by a government or local authority but by a commercial entity. Hence, the service was taxable after 1.6.2015. However, the Tribunal accepted the appellant's argument on time bar, noting that the department did not raise any query for five years and there was no evidence of willful suppression. The demand of Rs.1,49,58,963/- was set aside on account of time bar.

3. Short Payment of Service Tax on Repairs and Maintenance of Motor Vehicles:
The appellant contended that they maintained proper records and the short payment of Rs.19,32,214/- was due to the inclusion of free services in their accounts. The Tribunal noted that the demand was raised after five years without periodic scrutiny of returns. It was held that no suppression could be alleged, and the demand was set aside on account of time bar.

4. Service Tax Demand on Manpower Services:
The appellant argued that the expenditure towards manpower supply was accounted for as labor charges, and the demand of Rs.4,68,928/- was erroneous. The Tribunal found that since the Service Tax payable would be eligible for CENVAT Credit, it resulted in a revenue-neutral situation. The demand was set aside on account of time bar.

5. Invocation of Extended Period for Issuing Show Cause Notice:
The appellant argued that the Show Cause Notice issued on 18.6.2020 for transactions between 1.6.2015 to 30.06.2017 was time-barred. The Tribunal found that the appellant had been regularly filing ST-3 returns and there was no evidence of willful suppression. Citing case laws, it was held that the extended period could not be invoked without evidence of deliberate intent to evade tax. The entire demand of Rs.1,73,60,105/- was set aside on account of limitation.

Summary:
(a) The total confirmed demand of Rs.1,73,60,105/- is set aside on account of limitation.
(b) The confirmed demand of Rs.72,94,797/- on account of CENVAT availment is set aside both on account of merits and on account of limitation.

The appellant is eligible for consequential relief as per law.

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