Demand of service tax in the wrong category by the department - A win-win situation for the assessee / defaulter "

It happens many times that when assessee is not paying service tax either due to ignorance or due to bonafide belief that its services are not taxable or even with intend to evade payment of service tax, departmental officers (Revenue Auditors or Jurisdictional Officers) force the assessee to deposit the service with interest.

However, we are suggesting the bonafide assessees that before depositing service tax; proper assessment must be done and pros and cons must be analyzed.

There are several instances, in which the assessee has opted for legal rout of SCN + Appeal and won the case on the following grounds:

1 Department fails to properly classify the category of services on which demand is being raised.

2 Period of limitation.

3 Several other grounds, which depends on case to case basis.

There are several judgments for setting aside the demand raised by the department on the basis of one or more grounds discussed as above. These judgments can be found in the Case Laws - Section.

Misclassification of service tax can invalidate departmental demands when limitation and procedural defects are present. Assessees should avoid precipitate payment of disputed service tax and instead undertake legal and factual review; challenges to departmental demands commonly succeed where there is misclassification of services, defects in the period of limitation, or other procedural and evidentiary shortcomings, and precedents exist setting aside such demands when those defects are established.