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 amendment and conflicting judicial views was considered; the governing principle applied is that the extended period requires suppression, willful misstatement, fraud or similar conduct. The Tribunal found the department acted on books of account and that genuine uncertainty created by the retrospective amendment and divergent judicial pronouncements meant there was no suppression or fraud, therefore the extended period could not be invoked and demands confirmed beyond the normal period were set aside for the assessee.

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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.

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