The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), quashed service tax demand, on the ground that the issuance of a Show Cause Notice ( SCN ) was made after two years.
The appellants, Bikes Auto, are engaged in trading of automobile vehicle as dealers of vehicle manufacturers. The case of the department is that the service charges received towards the above activity of promotion of loan of financial institution is liable to Service Tax under Business Auxiliary Service.
Accordingly, the demand for Service Tax along with interest and penalties was confirmed by the Adjudicating Authority and upheld by Commissioner (Appeals). Therefore, the present appeal has been filed by the appellants.
Vipul Khandhar, Chartered Accountant appearing on behalf of the appellant submitted that he does not press on the taxability of the activities however, strongly argued that the demand is hit by limitation. The submission was that the issue of taxability was under serious doubt and therefore, the appellant had bona fide belief that these activities are not liable for Service Tax. Hence, there was no suppression of fact on mala fide intention with intent to evade payment of duty on the part of the appellant.
Vijay G. Iyengar, Assistant Commissioner (Authorized Representative) appearing on behalf of the Respondent reiterated the findings of the impugned order.
The Coram consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “The legal position was not clear, hence it can be the convenient view that being complex issue involved interpretation on the legal issue of the present case, the appellant had entertained the bona fide belief that the activity of the appellant is not liable to Service Tax.”
The Tribunal concluded by observing that in the present case, the period of demand involved is 2003-04 to 2005-06, however, the Show Cause Notice was issued on 23.10.2008 i.e. after almost 2 years and hence the demand is not sustainable on time bar itself.
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