2025 (7) TMI 1265 - AT - Service Tax

Time limitation - suppression of facts or not - nature of activity - sale or service? - supply of tangible goods for use service - cargo handling service - HELD THAT - It is found that though the appellants have a good case on merits but the entire demand is barred by limitation as the period involved is April 2009 to November 2011 and the Show Casue Notice was issued on 22.10.2014 which clearly shows that the entire demand is barred by limitation. Moreover the Department has not proved any of the essential ingredients as provided under Section 73(1) of the Act which are required to be established for invoking the extended period of limitation i.e. fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax. Further it is noted that the Hon ble Allahabad High Court in the case of Commr. of Cus. C.E. S.T. vs. Monsanto Manufacturer Pvt. Ltd. 2014 (4) TMI 505 - ALLAHABAD HIGH COURT and the Hon ble Bombay High Court in the case of Commr. of S.T. Mumbai-IV vs. Rochem Separation Systems (I) P. Ltd. 2018 (9) TMI 1598 - BOMBAY HIGH COURT have held that if the demand is barred by limitation then the Tribunal need not to decide the case on merits. Keeping in view the above said judgments it is opined that the demand in this case is entirely time barred and once the demand is time barred it is not required to go into the merits of the case. The appeal is allowed on limitation.

Summary

ISSUES:

Whether the transaction involving supply of transit mixers and related equipment amounts to "deemed sale" under sub-clause (d) of clause 29(A) of Article 366 of the Constitution, thereby excluding it from the levy of service tax.Whether the appellants retained "effective use, possession and control" of the goods supplied, thus rendering the transaction taxable as "supply of tangible goods for use service" under Section 65(105)(zzzzj) of the Finance Act, 1994.Whether the activity of unloading and cutting cement bags constitutes "cargo handling service" liable to service tax.Whether the demand for service tax is barred by limitation under Section 73(1) of the Finance Act, 1994, and if the extended period of limitation can be invoked.Whether the Tribunal should decide the matter on merits when the demand is found to be time barred.

RULINGS / HOLDINGS:

The Court held that the demand for service tax is barred by limitation as the Show Cause Notice was issued beyond the prescribed period, and the Department failed to establish the essential ingredients under Section 73(1) for invoking extended limitation, such as "fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax."Regarding the nature of the transaction, the Court acknowledged that the appellants claimed transfer of "effective use, possession and control" amounting to deemed sale, but did not decide on merits due to limitation bar.The Court noted that the activity of unloading and cutting cement bags within the factory premises did not amount to "cargo handling service" since no transportation was involved.The Court relied on precedents holding that if the demand is barred by limitation, the Tribunal need not decide the case on merits.Consequently, the impugned order upholding the service tax demand was set aside, and the appeal was allowed solely on the ground of limitation.

RATIONALE:

The Court applied the limitation provisions under Section 73(1) of the Finance Act, 1994, which prescribe a three-year period for raising a service tax demand, with an extended period only in cases involving "fraud or collusion or wilful mis-statement or suppression of facts."The Court referred to authoritative precedents from High Courts establishing that when a demand is barred by limitation, adjudicatory bodies are not required to examine the merits of the case.The Court acknowledged the legal principle under sub-clause (d) of clause 29(A) of Article 366 of the Constitution concerning "deemed sale" arising from transfer of effective control and possession, but refrained from adjudicating on this issue due to the limitation bar.No dissent or doctrinal shift was noted; the decision aligns with established limitation jurisprudence and statutory interpretation of service tax provisions.