2026-VIL-408-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Appellant challenged the demand for service tax for the period from January 2013 to June 2017 on the ground of limitation - Department had conducted an initial audit for the period from January 2013 to March 2014 and raised the issue of non-payment of service tax. However, no demand was raised at that time. Later, another audit was conducted covering the period after March 2015, and the impugned demand was issued invoking the extended period of limitation – HELD - Since the issue was known to the Department during the first audit, the demand issued after the second audit by invoking the extended period of limitation is not legally sustainable – Further, the services rendered by the appellant for “Linen Distribution Service” are appropriately classifiable under the category of "manpower supply service". The service tax liability for the normal period of limitation (i.e. from April 2016 to March 2017) is on the recipient of service, i.e., M/s. RailTel, under the reverse charge mechanism as per the applicable notifications - There is no evidence of any suppression of facts with intent to evade tax. Accordingly, the penalty imposed under Section 78 of the Finance Act, 1994 is set aside - The demand confirmed by invoking the extended period of limitation was set aside. The demand for the normal period of limitation was upheld, but the liability was held to be on the recipient of service, i.e., M/s. RailTel. The penalty imposed under Section 78 was set aside – The appeal is disposed of
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