19 - Demand and Recovery

The circumstances in which extended period of limitation can not be exercised, are as follows:

1) Bona fide belief : If assessee has bona fide belief, demand beyond 18 months can not be demanded. In the case of Mitul Engineering Services [2011 (5) TMI 179 - CESTAT, NEW DELHI], it was held that we find that there could be a definite legitimate belief of the appellant that they are not liable to discharge the service tax liability as per the agreement entered by them due to which the appellant may not have discharged service tax liability under section 73(1) of Finance Act, 1994. Invoking the provisions of section 80, we hold these being reasonable cause for the appellant to be believe that they need not discharge the service tax liability, the various penalties imposed on the appellants are set aside. Service tax liability beyond the period of limitation is set aside.

2) Bona fide doubt : If there are bona fide doubt about chargeability, extended period of limitation is not available. In the case of South City Motors [2011 (11) TMI 408 - CESTAT, NEW DELHI], it was held that this matter relates to scope of the entry for “Business Auxiliary Services”. There was considerable doubt about its coverage because of the very nature of the entry. There are contrary decisions of the Tribunal in the matter. In most of the decisions, Tribunal has taken the view that it is a case involving interpretation of the taxing entry and no mala fide or element of suppression or mis-statement is involved. The Higher Courts have been taking the view that in such situations the extended period of time cannot be invoked for raising demand. In this case also the demand is raised beyond the time limit of one year and such demand cannot be sustained.

3) Assessee sue motu approached department  : If assessee sue motu approached department at earlier stages, extended period of limitation can not be revoked. In the case of American Quality [2009 (6) TMI 67 - CESTAT, BANGALORE], it was held that the appellants have stated that on their own they had approached the department as early as 18.8.2003 with regard to the taxability of their services. However, the show cause notice dated 7.1.2005 has invoked the longer period, which is invoked for only suppression of facts, mis-statement or fraud with an intent to evade tax. In this case, the ingredients for invokation of longer period are not present. Hence, the longer period is not sustainable.

4) Interpretation of Law : In the case of Gangadhar Bulk Movers Pvt. Ltd. [2011 (11) TMI 358 - CESTAT, MUMBAI], it was held that as regards limitation of time we find that the issue raised in this appeal is one of interpretation of law. This view is strengthened by the circulars issued by CBEC, from time to time, in this regard. At the infancy stage of implementation of law there appears to have been confusion as to taxability. In these circumstances, the invocation of larger period of limitation is not sustainable. Further, in view of, no positive act, on the part of the appellant penalties are not imposable upon them. Therefore, we set aside the demand for the larger period and the penalties imposed.

5) Earlier favoured decision overruled by larger bench : In the case of Nice Color Lab [2013 (5) TMI 201 - CESTAT NEW DELHI], it was held that the Tribunal in the case of  Satyam Digital Photo Lab [2011 (9) TMI 199 - CESTAT, NEW DELHI] has held that when the law was declared against the assessee subsequently to the period involved, and when the earlier decision were in favour of the assessee, no suppression can be attributed to the appellant so as to justifiably invoked longer period of limitation. Accordingly extended period of limitation can not be revoked.

Extended limitation period: not available where assessee had bona fide belief or doubt about service tax liability. Extended limitation cannot be invoked where the assessee had a bona fide belief that no service tax was payable, where bona fide doubt existed about chargeability, where the assessee voluntarily approached the department earlier, where the issue is one of legal interpretation creating genuine confusion, or where earlier favorable decisions were subsequently overruled without evidence of suppression.