Extended limitation cannot be invoked absent suppression where subcontractor liability was subject to bona fide doubt.

M/s Orient Traders provided fabrication, erection and installation services as a sub-contractor to M/s Prasad & Company, which held the main contract with IFFCO.

For the relevant period, the Appellant received consideration of approximately ₹88,97,760.

The Department issued a show-cause notice dated 24.10.2017 demanding ₹4,28,531 in service tax, on the view that the Appellant was independently liable as a sub-contractor.

The adjudicating authority dropped the proceedings, but the Commissioner (Appeals) set that decision aside.

The Appellant appealed to the Tribunal, contending that the main contractor had paid service tax on the full contract value and that the extended period of limitation was unavailable.

Whether the extended period of limitation could be invoked to demand service tax from the Appellant where the main contractor had paid service tax on the full contract value and the Appellant claimed a bona fide belief that it had no separate liability.

The Tribunal applied the principle that the extended period of limitation may be invoked only where the requisite elements—such as suppression of facts, misstatement, fraud or collusion, with intent to evade service tax—are established.

It relied on Synergy Engineers Group Pvt. Ltd. [(2023) 5 CENTAX 158 (Tri.-Del)], Vinoth Shipping Services [2021 (55) G.S.T.L. 313 (Tri.-Chennai)] and Vishal Engineering Company [2023 (7) TMI 260—CESTAT-Chandigarh] for the position that, in disputes concerning a sub-contractor’s service-tax liability, the extended period cannot be invoked in the circumstances considered in those decisions.

The Tribunal noted that the main contractor had confirmed payment of service tax on the contract value, including the value attributable to the Appellant’s work, and that the Department had not disputed that payment.

Given the sub-contractor’s asserted bona fide belief and the uncertainty reflected in conflicting decisions on sub-contractors’ liability, the Tribunal found no basis to establish the intent-related ingredients required for the extended period.

Applying the cited decisions, it held that the demand, which had been raised by invoking the extended period, could not be sustained on limitation.

The Tribunal set aside the Commissioner (Appeals)’ order and allowed the appeal, with consequential relief, if any, in accordance with law.