Extended limitation and penalty under service tax fail where demand rests on disclosed accounts and no intent to evade is shown.

Service tax demands based on entries already disclosed in the assessee's balance sheet and profit and loss account cannot attract the extended limitation period unless the department shows concealment, suppression of facts, or a positive intent to evade duty. On the stated facts, the demand was held time barred because the records were already available to the department and the matter was revenue neutral. For the same reasons, penalty was held unsustainable, as the ingredients of suppression, wilful misstatement, or intent to evade were not established. The order was modified accordingly in favour of the assessee.

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Issues: (i) Whether the extended period of limitation could be invoked for the service tax demand based on the appellant's books of account, and whether the demand for the relevant period was time barred. (ii) Whether penalty was sustainable in the absence of suppression or intent to evade.

Issue (i): Whether the extended period of limitation could be invoked for the service tax demand based on the appellant's books of account, and whether the demand for the relevant period was time barred.

Analysis: The demand was worked out from the appellant's balance sheet and profit and loss account, which were already available to the department. On that basis, there was no material to establish concealment of information, suppression of facts, or any positive act indicating intent to evade duty. The fact that the appellant had also made good the amount and the situation was revenue neutral further negatived the basis for invoking the extended period under Section 73(1) of the Finance Act, 1994.

Conclusion: The invocation of the extended period was unsustainable and the demand for that period was time barred.

Issue (ii): Whether penalty was sustainable in the absence of suppression or intent to evade.

Analysis: Since the demand itself arose from records maintained by the appellant and no deliberate concealment or wilful misstatement was established, the ingredients necessary for penalty were not made out. Revenue neutrality also supported the conclusion that there was no intention to evade duty, making the penal consequence under Section 78(1) of the Finance Act, 1994 unwarranted.

Conclusion: The penalty was not sustainable and was set aside.

Final Conclusion: The appellant succeeded on both the limitation and penalty issues, and the order was modified accordingly in favour of the appellant.

Ratio Decidendi: Where the duty demand is founded on the assessee's own disclosed accounts and no independent material shows suppression or intent to evade, the extended period of limitation and consequential penalty cannot be sustained, especially when the matter is revenue neutral.

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