2015 (4) TMI 1111 - AT - Service Tax

Entitlement for refund - 25% of penalty imposed paid in respect of adjudication order which was waived by the Commissioner (Appeals) in its order- Commercial or industrial construction service - Department submitted that once the assessee exercises the option of payment of 25% of the penalty, he deemed to have accepted the demand of Service tax made under Proviso to Section 73 of the Finance Act, 1994 and penalty under Section 78 ibid and therefore the assessee cannot take recourse of filing appeal for setting aside the penalty. Held that - no legal provision is found which provides that once an assessee pays the entire demand with interest and penalty to the extent of 25% of the Service tax demanded, cannot challenge either the liability of Service tax and interest or penalty alone and the matter has to be treated as closed. No doubt, there is an instruction issued by the Board that once the assessee pays the Service tax and interest and intimates the department of the same on the basis of assessment of tax liability of the Central Excise Officer no show cause notice for differential amount of Service tax or interest can be demanded after one year except where there is a case for invoking suppression of facts, misdeclaration, fraud, etc. Further, there is no law laid down anywhere that the matter has to be considered as settled when an assessee pays the tax demanded with interest and penalty in accordance with law. It is only provided in the case of Settlement Commission where the Settlement Commission decides the issue and amounts as per the Settlement Commission are paid by the assessee, he has no right to challenge. I am not dealing with the decisions of Settlement Commission but decision of the adjudicating authority which was considered by the learned Commissioner (Appeals). - Decided against the revenue

Summary

Issues:
1. Liability for Service Tax on civil construction, erection, and commissioning services.
2. Waiver of penalty under Section 78 of the Finance Act, 1994.
3. Appeal against the Commissioner (Appeals) order regarding penalty waiver.

Analysis:

Issue 1: Liability for Service Tax on civil construction, erection, and commissioning services
The appellant, engaged in civil construction services, was investigated for evading Service Tax. The appellant admitted liability and paid a certain amount. Further investigation revealed additional tax liabilities for erection, commissioning, and installation services. The appellant agreed to pay the outstanding amount, which was adjusted against commercial or industrial construction services. The total demand for works contract services was calculated, and penalties were proposed invoking the extended period of limitation.

Issue 2: Waiver of penalty under Section 78 of the Finance Act, 1994
The proceedings resulted in confirming the demand, with penalties proposed. The Commissioner (Appeals) waived the penalty under Section 78 but upheld the rest of the demand already paid by the appellant with interest. The appellant paid 25% of the penalty and sought a refund. The Revenue appealed against the waiver, arguing that once the penalty option is exercised, the appellant cannot challenge the penalty by filing an appeal.

Issue 3: Appeal against the Commissioner (Appeals) order regarding penalty waiver
The Revenue contended that the Commissioner erred in waiving the penalty under Section 78, as the option to pay 25% of the penalty deems acceptance of the demand and precludes challenging the penalty. However, the tribunal found no legal provision barring the appellant from challenging the liability, interest, or penalty after paying the demanded amount. The tribunal highlighted that the Settlement Commission's decisions differ from adjudicating authority decisions, emphasizing that paying the tax, interest, and penalty does not automatically settle the matter unless specified by law.

In conclusion, the tribunal rejected the Revenue's appeal, stating that the appellant retains the right to challenge the liability, interest, or penalty even after paying the demanded amount. The judgment clarifies the distinction between Settlement Commission decisions and adjudicating authority decisions regarding the finality of payments made by the assessee.