Trading receipts and absence of suppression defeated Service Tax demand and extended limitation.

Trading receipts from sale and supply of stone chips and allied goods were held not liable to Service Tax because the records, including VAT invoices, VAT returns, Form 26AS and audit reports, showed that a substantial part of the turnover was from non-taxable trading activity, while tax had already been discharged on commission income from clearing and forwarding services. The extended period of limitation was also held unsustainable because the record did not establish suppression of facts or wilful misstatement; departmental inquiry had already begun and the appellant had responded to queries. The Service Tax demand, interest and penalties were therefore set aside.

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Issues: (i) Whether receipts from sale and supply of stone chips and allied trading activity were liable to Service Tax; (ii) Whether invocation of the extended period of limitation was sustainable in the absence of suppression or wilful misstatement.

Issue (i): Whether receipts from sale and supply of stone chips and allied trading activity were liable to Service Tax.

Analysis: The appellant produced VAT invoices, VAT returns, Form 26AS, audit reports and other records to show that a substantial part of the turnover represented trading in stone chips and allied goods, while Service Tax had already been paid on taxable commission receipts from clearing and forwarding activity. The adjudicating authority had not accepted this explanation despite the documents on record. Trading turnover and reimbursement-type receipts do not constitute taxable service value merely because they appear in the profit and loss account.

Conclusion: The trading receipts were not liable to Service Tax, and the demand on that component could not be sustained.

Issue (ii): Whether invocation of the extended period of limitation was sustainable in the absence of suppression or wilful misstatement.

Analysis: The investigation had commenced in 2015 and the appellant had responded to the departmental queries. The record did not disclose any substantive material showing suppression of facts or wilful misstatement by the appellant. In the absence of such evidence, the extended period could not be invoked to sustain the demand.

Conclusion: Invocation of the extended period of limitation was unsustainable, and the demand was barred by limitation.

Final Conclusion: The demand of Service Tax, interest and penalties was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where the assessee substantiates that part of the turnover represents non-taxable trading activity and the Revenue fails to prove suppression or wilful misstatement, Service Tax demand and extended limitation cannot be sustained.

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