Extended limitation for Service Tax demand rejected where returns were filed and no suppression or wilful misstatement was shown.

Extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was held unsustainable where the assessee regularly filed ST-3 returns, paid tax on dry cleaning services, and omitted wet cleaning services under a stated bona fide belief that only dry cleaning was taxable. As the demand was based on verification of returns and information already with the department, and no independent material showed suppression of facts or wilful misstatement with intent to evade tax, the Service Tax demand, with interest and penalty, was set aside in favour of the assessee.

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Issues: Whether the demand of Service Tax, interest, and penalty could be sustained by invoking the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994.

Analysis: The appellant was found to have been regularly filing ST-3 returns and paying tax on dry cleaning services, while omitting wet cleaning services on the stated bona fide belief that only dry cleaning was taxable. The demand was raised on the basis of verification of returns and information already available with the department, and no independent material was produced to establish suppression of facts or wilful mis-statement with intent to evade tax. In these circumstances, invocation of the extended period was held to be unsustainable.

Conclusion: The demand confirmed by invoking the extended period of limitation was set aside, along with the consequential interest and penalty, in favour of the assessee.

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