Grants-in-aid are not taxable consideration for consultancy services; earlier demand was time-barred and later period required fresh verification.

Grants-in-aid received from Government departments and ministries were treated as financial assistance, not consideration for scientific or technical consultancy services, and were therefore not liable to service tax. The earlier demand was found time-barred, as invocation of the extended period was not justified on the facts and evidence already on record. The later period was remanded for limited re-determination after excluding grants-in-aid from the taxable base and verifying the remaining receipts. The core principle is that governmental grants do not form taxable consideration unless the receipts are properly shown to be payment for services.

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Issues: (i) Whether grants-in-aid received from Government departments and ministries formed consideration for taxable scientific or technical consultancy services. (ii) Whether the demand for the earlier period could be sustained by invoking the extended period of limitation.

Issue (i): Whether grants-in-aid received from Government departments and ministries formed consideration for taxable scientific or technical consultancy services.

Analysis: The receipts were examined against the documentary record and the nature of the projects. Amounts received as grants-in-aid from Government departments and ministries were treated as financial assistance and not as consideration for service. On that basis, such receipts were held not liable to service tax under the alleged taxable category. For the later period, the records produced were found sufficient to show that the impugned amounts required verification before being brought to tax.

Conclusion: Grants-in-aid received from Government departments and ministries were not taxable as consideration for scientific or technical consultancy services.

Issue (ii): Whether the demand for the earlier period could be sustained by invoking the extended period of limitation.

Analysis: The earlier demand was found to be time-barred on the facts and the evidence already available on record. In view of the nature of the receipts and the material placed, invocation of the extended period was not justified.

Conclusion: The demand for the earlier period could not be sustained by invoking the extended period of limitation.

Final Conclusion: The demand for the earlier period was annulled, while the later period matter was sent back for limited re-determination after excluding grants-in-aid from the taxable consideration.

Ratio Decidendi: Grants-in-aid received as governmental financial assistance do not constitute consideration for service tax, and tax demands cannot be sustained on such receipts without proper exclusion of grant amounts from the taxable base.

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