Extended limitation for service tax requires proof of deliberate suppression; mere non-payment cannot sustain time-barred demand or penalty.

Extended limitation for service tax could be invoked only on proof of deliberate suppression, wilful misstatement, or other positive conduct showing intent to evade tax; mere non-payment or non-disclosure was insufficient. As the demand for the later period rested on balance-sheet figures and documents already available to the assessee, and an earlier notice on the same issue had already been issued, the record did not establish the requisite mala fide intent. The demand beyond the normal period was therefore time-barred, and the related penalty could not survive once the foundation for extended limitation failed. The challenge to the remand and speaking-order direction also failed.

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Issues: (i) Whether the extended period of limitation was invokable for the service tax demand on the ground of suppression of facts with intent to evade tax; (ii) Whether penalty under Section 78 could be sustained and whether the impugned order required interference.

Issue (i): Whether the extended period of limitation was invokable for the service tax demand on the ground of suppression of facts with intent to evade tax.

Analysis: The demand for the subsequent period was based on balance-sheet figures and other documents obtained from the assessee, while an earlier show cause notice on the same issue had already been issued for the prior period. The record did not establish any positive act of suppression, wilful misstatement, or deliberate withholding of information with intent to evade tax. In such circumstances, mere non-payment or non-disclosure, without proof of a conscious design to evade, was held insufficient to sustain invocation of the extended period.

Conclusion: The extended period of limitation was not invokable and the demand beyond the normal period was unsustainable.

Issue (ii): Whether penalty under Section 78 could be sustained and whether the impugned order required interference.

Analysis: Since the foundation for invoking the extended period failed, the penalty based on the same allegation of suppression also could not survive. The Tribunal further found no merit in the Revenue's challenge to the remand and speaking-order direction, as the impugned order had proceeded on the absence of proof of mala fide intent and the need for proper adjudication on the material placed by the assessee.

Conclusion: Penalty under Section 78 was not sustainable and no interference with the impugned order was warranted.

Final Conclusion: The Revenue's challenge failed, and the assessee retained the benefit of the Commissioner (Appeals)'s relief, including the setting aside of the time-barred demand and related penalty.

Ratio Decidendi: Extended limitation under the service tax law can be invoked only on proof of deliberate suppression, wilful misstatement, or other positive conduct showing intent to evade tax; absent such proof, the normal limitation applies and consequential penalty cannot stand.

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