Service Tax demands for 2008-12 set aside on limitation grounds, 2012-13 remanded for verification

CESTAT Kolkata allowed the assessee's appeal partially in a Service Tax demand case. The tribunal set aside demands for FY 2008-09 to 2011-12 on limitation grounds, as audit findings showed no liability for these years. For FY 2012-13, the matter was remanded for verification of payment basis vs mercantile system claims. The tribunal appropriated Rs.17,00,404 already paid before notice issuance and allowed CENVAT credit for employee transportation services as eligible input services. Revenue's appeal was dismissed as withdrawn under National Litigation Policy due to amount being below threshold limit.

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Issues Involved:

1. Demand of Service Tax and CENVAT Credit.
2. Appropriation of pre-paid Service Tax and penalty.
3. Bar of limitation on Service Tax demands.
4. Eligibility of CENVAT Credit on transportation services.
5. Compliance with National Litigation Policy for Revenue's appeal.

Issue-wise Detailed Analysis:

1. Demand of Service Tax and CENVAT Credit:

The assessee was issued a Show Cause Notice demanding Service Tax of Rs.1,12,00,470/- for the period from April 2008 to March 2013 and proposed recovery of irregularly availed CENVAT Credit amounting to Rs.18,28,529/-. The adjudicating authority confirmed a demand of Rs.50,19,379/- and dropped the remaining demand. The assessee contended that the demand of Rs.46,82,053/- was wrongly calculated based on financial statements not related to them and argued that the figures used were related to reimbursements or salary, not taxable services. The assessee also claimed that the demand for certain years was barred by limitation.

2. Appropriation of Pre-paid Service Tax and Penalty:

The assessee claimed to have paid Rs.3,37,326/- before the issuance of the Show Cause Notice, which was not appropriated in the impugned order. The tribunal acknowledged this payment and directed its appropriation against the confirmed demand, stating no penalty was imposable on this amount as it was paid before the Notice.

3. Bar of Limitation on Service Tax Demands:

The assessee argued that the demands for the Financial Years 2009-10, 2010-11, and 2011-12 were barred by limitation since the audit objection was raised only for 2012-13. The tribunal found the demand for these years unsustainable on merits and barred by limitation, as the audit team had not raised objections for these years.

4. Eligibility of CENVAT Credit on Transportation Services:

The assessee reversed Rs.17,00,404/- of irregularly availed credit before the Notice, which was not appropriated in the order. The tribunal directed its appropriation and held no penalty was imposable. Regarding Rs.1,16,802/-, the tribunal found the credit related to transportation of employees after office hours qualified as 'input service,' allowing the assessee to avail the credit, thus setting aside the demand.

5. Compliance with National Litigation Policy for Revenue's Appeal:

The Revenue's appeal against the dropping of Rs.59,94,305/- was dismissed as withdrawn due to the amount being below the threshold prescribed by the National Litigation Policy, which fixed the limit at Rs.60,00,000/-.

Conclusion:

The tribunal set aside the demands for the Financial Years 2008-09 to 2011-12 on the ground of limitation. The demand for 2012-13 was remanded for verification. The assessee's entitlement to CENVAT Credit on transportation services was upheld. The Revenue's appeal was dismissed as per the National Litigation Policy. The appeals were disposed of accordingly, with the cross-objection by the assessee also disposed of.

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