Service tax must be computed on amounts actually received; outstanding income tax dues cannot form the tax base, and limitation was rejected.

Service tax liability was held to be computable only on amounts actually received, not on sums merely shown as due in income tax returns, so the demand was remanded for fresh quantification after excluding outstanding dues. On limitation, the Tribunal rejected the plea that the demand was time-barred, holding that the extended period could apply where statutory grounds such as non-disclosure or failure to file returns were established. The appeals were therefore disposed of by remand on quantification, while the limitation challenge failed.

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Issues: (i) Whether service tax could be confirmed on amounts shown as due in income tax returns instead of amounts actually received. (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether service tax could be confirmed on amounts shown as due in income tax returns instead of amounts actually received.

Analysis: The demand was based not only on the records, books and invoices but also on amounts reflected as due in the income tax returns. Service tax, however, is leviable on amounts already received and not merely on sums shown as outstanding in income tax returns. The Tribunal applied the earlier view that such outstanding amounts cannot form the basis for confirmation of service tax, and therefore the demand required recomputation by excluding those dues.

Conclusion: The demand was held to be liable for recomputation, and the assessee succeeded on this issue.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The Tribunal held that, under the relevant provisions, there was no absolute time bar in the manner contended by the assessee. It further held that where the statutory conditions relating to failure to file returns or disclose material facts are satisfied, demand could be raised within the permitted extended period. On that footing, the plea of limitation was rejected.

Conclusion: The demand was held not to be barred by time, and the assessee failed on this issue.

Final Conclusion: The appeals were disposed of by remand for fresh quantification of service tax liability limited to amounts actually received, while the challenge on limitation was rejected.

Ratio Decidendi: Service tax liability must be computed on amounts actually received, and not on sums merely shown as due in income tax returns; limitation under the service tax law may be extended where the statutory grounds for non-disclosure or failure to file returns are made out.

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