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of <h1>Service tax demand on manpower recruitment agency set aside as time-barred under normal limitation period</h1> <h3>Delphi Automotive Systems Private Limited Versus Commissioner of Service Tax, Delhi-IV</h3> Delphi Automotive Systems Private Limited Versus Commissioner of Service Tax, Delhi-IV - TMI ISSUES: Whether the demand of service tax on reimbursed salary under 'Manpower Recruitment and Supply Agency Service' is barred by limitation.Whether extended period of limitation under Section 73(1) of the Finance Act, 1994 can be invoked in absence of evidence of fraud, wilful misstatement, or suppression.Whether audit-based demand justifies invocation of extended period of limitation.Whether the issue of service tax liability on reimbursed salary was subject to bona fide dispute and litigation affecting limitation. RULINGS / HOLDINGS: The demand of service tax for the period 2006-07 and 2007-08 is barred by limitation as the Show Cause Notice (SCN) was issued beyond the one-year time limit from the relevant date, without any evidence of fraud, wilful misstatement, or suppression.The extended period of limitation under Section 73(1) cannot be invoked in the absence of proof of fraud, wilful misstatement, or suppression by the appellant.The demand raised on the basis of audit does not justify invocation of the extended period of limitation, as it is a settled legal position that extended period cannot be invoked when demand is based on audit.The issue involved was under bona fide dispute and litigation, which attained finality only with the Supreme Court judgment in Commissioner vs. M/s Northern Operating Systems Pvt Ltd, and thus limitation cannot be extended.Following the ratios of multiple Tribunal decisions and the Supreme Court ruling, the demand is set aside on limitation grounds without adjudicating merits. RATIONALE: The Court applied the limitation provisions under the Finance Act, 1994, specifically Sections 73(1), 75, 77, and 78, and the statutory time limits for issuance of SCNs based on the due date of filing half-yearly returns.The Court relied on the principle that extended limitation period under Section 73(1) is invokable only upon proof of fraud, wilful misstatement, or suppression of facts, which was not established.The Court referenced the Supreme Court judgment in Commissioner vs. M/s Northern Operating Systems Pvt Ltd, which clarified the limitation and extended period applicability, and held that demands beyond normal limitation period were to be dropped in absence of fraud or suppression.The Court noted that demands raised solely on audit findings do not qualify for extended limitation period invocation, consistent with settled legal precedent.The Court acknowledged multiple Tribunal decisions following the Supreme Court's ruling, reinforcing the limitation bar on similar demands.No dissent or doctrinal shift was indicated; the Court followed established statutory interpretation and precedent.
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