2026 (3) TMI 19 - AT - Service Tax

Extended limitation period for service tax cannot be invoked absent suppression or fraud where retrospective amendment created genuine uncertainty.

Whether the extended limitation under Section 73(1) of the Finance Act, 1994 applies to service tax on renting of immovable property amid a retrospective ... Invocation of extended period of limitation for service tax - non-invocation of extended limitation in absence of suppression, fraud or collusion - retrospective amendment creating genuine legal ambiguity on levy Invocation of extended period of limitation for service tax - non-invocation of extended limitation in absence of suppression, fraud or collusion - Extended period under subsection (1) of Section 73 could not be invoked to recover service tax for the disputed period. - HELD THAT: - The Tribunal found that the demand related to renting of immovable property for commercial purposes arose during a period when the scope of levy was the subject of genuine doubt owing to judicial divergence and a subsequent retrospective amendment. The appellant had maintained books of account from which the department issued the show cause notice; there was no material establishing suppression, willful misstatement, fraud or collusion as contemplated in the proviso to subsection (1) of Section 73. In these circumstances, and having regard to the retrospective amendment which created confusion in trade (and consistent with this Bench's earlier reasoning in Commissioner of Service Tax, Mumbai-II vs. Upnagar Shikshan Mandan ), the extended period for confirmation of service tax could not be invoked and the demand confirmed beyond the normal period was unsustainable. The adjudication beyond the normal period of limitation is not maintainable and the demand confirmed beyond the normal period is set aside. Final Conclusion: The appeal is allowed on the ground of limitation and the impugned order confirming demands beyond the normal period is set aside in favour of the appellant. Issues: (i) Whether the extended period of limitation under subsection (1) of Section 73 of the Finance Act, 1994 can be invoked to confirm service tax demand in respect of renting of immovable property where retrospective amendment and judicial divergence created confusion, in absence of suppression, willful misstatement or fraud.Analysis: The Tribunal examined the effect of the Finance Act amendments and prior conflicting judicial views on the levy of service tax on renting of immovable property. The Finance Act, 2007 introduced the taxable entry for renting of immovable property and subsequent retrospective amendment altered the definition of person liable to pay service tax, producing genuine uncertainty in trade about exigibility. The Tribunal applied the statutory limitation framework under Section 73(1) of the Finance Act, 1994 and the settled principle that the extended period applies only where there is suppression, willful misstatement, fraud or similar conduct as specified in the proviso. In circumstances where the department issued the show cause notice based on books of account and where the non-payment arose amid contentious retrospective amendment and divergent judicial pronouncements, the necessary ingredients for invoking the extended period were not established. The Tribunal also relied on its earlier decision dealing with similar contentious retrospective amendments and concluded that mere non-payment in such context does not amount to suppression or fraud justifying invocation of the extended period.Conclusion: The extended period under subsection (1) of Section 73 of the Finance Act, 1994 cannot be invoked; the challenge to the demand is allowed on the ground of limitation and the adjudged demands confirmed beyond the normal period are set aside in favour of the assessee.