2025 (7) TMI 930 - AT - Service Tax

Non-payment of service tax - appellant had provided Laundry Services but not paid the service tax - invocation of extended period of limitation - HELD THAT - The entire demand is barred by limitation because the demand of service tax pertains to the period 2006 to 2007 and the Show Cause Notice was issued on 25.02.2011. Further it is found that the Show Cause Notice is based on the Balance Sheet and other documents provided by the appellant wherein the appellant has stated the position of account clearly. Further it is found that once the Show Cause Notice is served on the basis of figures reflected in Balance Sheet and Profit Loss Account which are public documents then invocation of extended period of limitation for raising the demand on the basis of figures shown in public documents is not sustainable under Section 73 of the Finance Act. Similarly in the case of Ace Creative Learning Pvt Ltd 2021 (4) TMI 687 - CESTAT BANGALORE the Tribunal has held that the extended period of limitation is not invokable where the Revenue s case is based on the Balance Sheet Returns and other records of the assessee. The impugned order is set aside and the appeal is allowed on limitation.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

- Whether the demand of service tax raised for the period 2006-2007 on the appellant for providing Laundry Services, without proper segregation between Dry Cleaning and Wet Cleaning, is sustainable under the Finance Act, 1994.

- Whether the extended period of limitation under Section 73(1) of the Finance Act, 1994 was rightly invoked by the Revenue for issuing the Show Cause Notice dated 25.02.2011, given that the demand relates to the period 2006-2007.

- Whether the appellant's provision of Laundry Services, including Dry Cleaning and Wet Cleaning, attracts service tax liability and whether the Department has correctly applied the relevant provisions of law.

- Whether the appellant was denied proper opportunity of personal hearing during adjudication and if the adjudication order is sustainable in law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Taxability of Laundry Services - Distinction between Dry Cleaning and Wet Cleaning

Relevant legal framework and precedents: The Finance Act, 1994, specifically Section 65(105)(zt) read with Section 65(37), defines taxable services including Dry Cleaning services. The appellant contended that only Dry Cleaning services are taxable, whereas Wet Cleaning is not taxable under the Act.

Court's interpretation and reasoning: The appellant submitted that the Department failed to bifurcate the services rendered into Dry Cleaning and Wet Cleaning in the Show Cause Notice, and demanded service tax on Laundry Services as a whole. The appellant argued that Wet Cleaning is not taxable and only Dry Cleaning attracts service tax.

Key evidence and findings: The appellant is a 5-star hotel providing these services to guests and charging consideration. However, the Department did not produce invoices or records showing separate charges for Dry Cleaning and Wet Cleaning services, which was highlighted by the Revenue's Authorized Representative relying on a Tribunal decision.

Application of law to facts: The Tribunal noted the absence of clear segregation of services in the Department's demand and the failure to establish that all Laundry Services rendered were taxable. However, the Tribunal did not delve deeply into the merits of taxability given the overriding limitation issue discussed below.

Treatment of competing arguments: The appellant's argument about non-taxability of Wet Cleaning was countered by the Revenue's reliance on the absence of separate invoicing and the precedent holding the entire Laundry Service liable. The Tribunal, however, refrained from a conclusive determination on this issue due to limitation considerations.

Conclusion: The Tribunal did not conclusively decide on the taxability issue due to the overriding limitation bar but acknowledged the appellant's contention regarding the distinction between Dry and Wet Cleaning services.

Issue 2: Invoking Extended Period of Limitation under Section 73(1) of the Finance Act, 1994

Relevant legal framework and precedents: Section 73(1) allows the Revenue to invoke an extended period of limitation beyond three years from the date of service of the show cause notice if there is suppression of facts or misstatement by the assessee. Various Tribunal and High Court decisions were cited, including Mega Trends Advertising Ltd, Ace Creative Learning Pvt Ltd, and Zee Media Corporation Ltd, which clarify that invocation of extended period is not sustainable if the demand is based on figures reflected in public documents such as Balance Sheets and Profit & Loss Accounts.

Court's interpretation and reasoning: The Tribunal observed that the Show Cause Notice was issued on 25.02.2011 for the period 2006-2007, which is beyond the normal three-year limitation period. However, the demand was based on figures drawn from the appellant's own Balance Sheet and Profit & Loss Account, which are public documents. The Tribunal held that since these documents were not suppressed and the appellant had not concealed any material facts, the extended period of limitation could not be invoked.

Key evidence and findings: The appellant had furnished Balance Sheet and other financial documents to the Department, which reflected the income from the services rendered. No evidence of suppression or misstatement was found by the Tribunal.

Application of law to facts: Applying the principle that extended limitation cannot be invoked when the demand is based on public documents, the Tribunal concluded that the demand was barred by limitation.

Treatment of competing arguments: The Revenue argued for the validity of the extended period invocation, but the Tribunal relied on binding precedents and the facts that the appellant's accounts were publicly available and no mala fide was established.

Conclusion: The Tribunal held that the demand is time barred and the extended period of limitation under Section 73(1) was wrongly invoked.

Issue 3: Denial of Proper Opportunity of Personal Hearing and Validity of Adjudication Order

Relevant legal framework and precedents: Principles of natural justice require that the assessee be given a proper opportunity of personal hearing before confirming any demand. The appellant contended that the Adjudicating Authority confirmed the demand without considering the reply or granting adequate hearing.

Court's interpretation and reasoning: While the appellant raised this procedural grievance, the Tribunal did not extensively address this issue, as the appeal was decided primarily on limitation grounds.

Key evidence and findings: The appellant's contention of denial of proper hearing was noted, but no detailed findings were recorded.

Application of law to facts: Since the appeal was allowed on limitation grounds, the Tribunal did not find it necessary to examine this issue in detail.

Treatment of competing arguments: The Revenue did not specifically address this procedural issue in detail.

Conclusion: The issue remained unaddressed substantively due to the limitation bar.

3. SIGNIFICANT HOLDINGS

The Tribunal's key legal determinations and principles established include:

"The entire demand is barred by limitation because the demand of service tax pertains to the period 2006 to 2007 and the Show Cause Notice was issued on 25.02.2011. Further, the Show Cause Notice is based on the Balance Sheet and other documents provided by the appellant wherein the appellant has stated the position of account clearly."

"Once the Show Cause Notice is served on the basis of figures reflected in Balance Sheet and Profit & Loss Account which are public documents, then invocation of extended period of limitation for raising the demand on the basis of figures shown in public documents, is not sustainable under Section 73 of the Finance Act."

"We also find that the demand is squarely barred by limitation having been raised by invoking the longer period. The Revenue has picked up the figures from the balance sheet and profit and loss account maintained by the assessee. The balance sheet and profit and loss account has been held to be public documents by various decisions and it stands concluded that when the income arising from various activities stand reflected in the said public documents, it cannot be said that there was any suppression or misstatement on the part of the assessee so as to invoke the longer period of limitation."

"If the demand is barred by limitation then the Tribunal need not to decide the case on merits."

Accordingly, the Tribunal set aside the impugned order and allowed the appeal on the ground of limitation, without adjudicating on the merits of taxability or procedural issues.