Chennai CESTAT Cancels Service Tax Demand of Rupees 2.24 Crore on Time Bar Grounds

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Chennai has quashed a service tax demand totaling ₹2.24 crore. The appellate authority determined that the revenue department issued the demand beyond the permissible limitation period, rendering the proceedings time-barred despite allegations of intermediary involvement. Tax authorities previously attempted to levy service tax by classifying certain operations under intermediary services, invoking extended limitation periods where suppression of facts is alleged.

However, the tribunal evaluated the timelines and evidence, concluding that the department failed to establish grounds for invoking extended limitation, thereby invalidating the tax demand. Tax professionals handling legacy indirect tax disputes should review pending show-cause notices for similar limitation vulnerabilities. Track upcoming tribunal rulings on time-bar provisions to strengthen arguments in ongoing litigation matters.

Bottom line: Verify the exact issuance timelines of legacy tax notices to protect clients from time-barred demands.