2015 (4) TMI 1118 - AT - Service Tax

Imposition of penalty - Liability of Service tax - Dredging services i.e. desilting of Mithi River - Held that - by applying the decision of this Bench in the case of Reliance Michigan (JV) v. CCE Thane II 2013 (7) TMI 236 - CESTAT MUMBAI , the appellant is liable to discharge his service tax liability along with interest thereof and the penalty of ₹ 1000/- imposed on the appellant under Section 77 of Finance Act, 1994 is upheld. As regards the penalties imposed under Section 76 and 78 of Finance Act, 1994, it is found that the elements of suppression of facts or mis-statement with intent to evade the service tax are absent in this case as the contract of so-called desilting was awarded by the Government of Maharashtra and the entire issue was in the public domain. Therefore, non-payment of service tax by the appellant would be due to mis-interpretation of the provisions of the Finance Act, 1994. Accordingly, we, by invoking the provisions of Section 80 of the Finance Act, 1994 as it was during the relevant period, set aside the penalties imposed under Sections 76 and 78 of the Finance Act, 1994. - Appeal disposed of

Summary

Issues involved:
Service tax liability on desilting activity under dredging services category.

Analysis:
The appeal was filed against an order-in-original regarding the service tax liability on the appellant for desilting the Mithi River. The appellant argued that the desilting activity was not related to a river but to a water body that drained water from a man-made source. The appellant referred to a previous case where penalties were set aside. The Departmental Representative contended that the appellant was aware of the service tax liability but failed to discharge it, leading to correctly imposed penalties.

The Tribunal held that the issue was covered by a previous judgment and ruled that the appellant was liable to discharge the service tax along with interest. The penalty of Rs. 1000 under Section 77 of the Finance Act, 1994, was upheld. However, regarding penalties under Sections 76 and 78, the Tribunal found no intent to evade service tax as the desilting contract was awarded by the Government and was public knowledge. The non-payment was attributed to misinterpretation of the law. Therefore, invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalties under Sections 76 and 78.

In conclusion, the appeal was disposed of with the appellant being held liable for service tax and interest, with the penalty under Section 77 upheld, but penalties under Sections 76 and 78 being set aside due to the absence of intent to evade tax.