Extended limitation cannot be invoked absent suppression where the registered assessee filed statutory returns.

The appellant was registered as a service provider under the categories of “clearing and forwarding agency service” and “renting of immovable property service” and had been paying Service Tax and filing ST-3 returns.

The Department issued a Show Cause Notice dated 15 September 2011 demanding Service Tax for 2006–07 and 2007–08 on the allegation that the appellant had not discharged tax on the entire consideration received.

The appellant contended that amounts received from principals towards reimbursement of expenses such as loading, unloading, transportation and handling were not consideration for the taxable service, and that invocation of the extended period was unsustainable because the appellant was registered, had paid Service Tax and had disclosed the relevant figures in its records and returns.

The lower authorities confirmed a demand of Rs. 2,00,769 with interest and imposed equivalent penalty under Section 78 and a penalty of Rs. 1,000 under Section 77 of the Finance Act, 1994.

The appellant appealed to the Tribunal.

1. Whether reimbursements received by the appellant from its principals towards expenses incurred in providing clearing and forwarding services were includible in the taxable value and exigible to Service Tax.

2. Whether the extended period of limitation could validly be invoked where the appellant was registered, had paid Service Tax, filed ST-3 returns, and the relevant reimbursement amounts were reflected in its accounts.

The Tribunal applied the valuation principles under the Finance Act, 1994, including the provisions governing the taxable value of services and the extended period of limitation, as well as the penalty provisions under Sections 77 and 78.

It relied on Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., 2018 (10) G.S.T.L. 401 (S.C.), wherein the Supreme Court held that reimbursable expenses, being amounts incurred on behalf of the client and not consideration for the taxable service, were not includible in the gross value of taxable services.

The Tribunal also applied the settled limitation principle that the extended period cannot be invoked in the absence of suppression of facts or wilful misstatement, particularly where the assessee is registered, files statutory returns and discloses the relevant transactions.

The Tribunal noted that the appellant was duly registered, had been paying Service Tax and had filed ST-3 returns.

The reimbursement amounts were recorded in the appellant’s profit and loss account, and the Department itself used those records to quantify the demand.

These facts undermined the allegation that the appellant had suppressed material facts.

The Tribunal further observed that the taxability of reimbursed expenses had been the subject of continuing litigation and was ultimately clarified by the Supreme Court in Intercontinental Consultants.

Consequently, even though the appellant disputed the substantive taxability of the reimbursements, the Tribunal found that the extended-period demand was legally unsustainable because the necessary element of suppression was absent.

It therefore set aside the confirmed Service Tax demand, interest and consequential penalties on the ground of limitation alone, without finally determining the substantive taxability of the reimbursements, and allowed the appeal with consequential relief, if any, in accordance with law.