2009 (7) TMI 442 - AT - Service Tax

Demand - limitation - Revenue is not disputing that the appellant approached to the department in 2004 but submits that the period is prior to the said intimation during which there was no correspondence between the respondents and the Revenue. However it is seen that even after the respondents approached department in 2004 they were not advised to pay tax and show cause notice was issued on 2-9-2005. As rightly recorded by the Commissioner (Appeals) that department itself was not clear and that is the reason that their request for clarification made in 2004 was not replied to. In such a case demand having been raised beyond the normal period of limitation has rightly been barred by limitation by Commissioner (Appeals).

Summary

Issues:
1. Appeal against dropping of demand on the ground of limitation.

Analysis:
The case involved an appeal by the Revenue against the dropping of a demand on the ground of limitation by the Commissioner (Appeals). The appellant had initially filed an application for registration as a "Clearing and Forwarding Agent," but later it was viewed that the service fell under the category of a cargo handling agency. The show cause notice (SCN) was issued beyond the normal period of limitation, covering the period from October 2002 to April 2003, and issued on 2-9-2005. The key contention was the absence of "mens rea" or intent to evade service tax by the appellant. The Commissioner (Appeals) noted that the department was unclear and did not advise the appellant to pay tax even after they approached the department in 2004, leading to the demand being rightfully barred by limitation.

The appellate authority found that the appellant had approached the department in 2004 but was not advised to pay tax, and a show cause notice was issued on 2-9-2005, beyond the normal period of limitation. The Commissioner (Appeals) correctly observed that the lack of clarity on the part of the department resulted in the request for clarification made in 2004 not being replied to. As a result, the demand raised by the Revenue was rightly barred by limitation. The appellate tribunal rejected the appeal filed by the Revenue based on these grounds, affirming the decision of the Commissioner (Appeals) to drop the demand on the basis of limitation.

In conclusion, the appellate tribunal upheld the decision of the Commissioner (Appeals) to drop the demand on the ground of limitation due to the absence of intent to evade service tax by the appellant and the department's lack of clarity in advising the appellant to pay tax. The show cause notice issued beyond the normal period of limitation was deemed barred by limitation, leading to the rejection of the Revenue's appeal.