2016 (3) TMI 1192 - AT - Service Tax

Penalty u/s 78 of FA, 1994 - Work Contract Service - invocation of section 80 - Held that - the entire demand as per SCN, except for a nominal interest of ₹ 3,725.30 was paid by respondent before issuance of SCN - The fact that respondent is an illiterate civil contractor was considered by the original authority and waived penalty u/s 78 while adjudicating the SCN of subsequent period - mere non-declaration cannot be considered as suppression of facts - Commissioner (Appeals) has rightly waived the penalty imposed u/s 78 of FA, 1994, by invoking section 80 - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against setting aside penalty under Section 78 of Finance Act, 1994 by Commissioner (Appeals).

Analysis:
1. The appeal was filed by the revenue challenging the order of the Commissioner (Appeals) which set aside the penalty imposed under Section 78 of the Finance Act, 1994. The respondent was providing Works Contract Service to a specific company and failed to discharge the service tax liability for the period 2008-09 to 2009-10. The original authority confirmed a demand along with interest and imposed penalties. The respondent appealed the decision, leading to the current dispute.

2. The main contention raised by the revenue was that the Commissioner (Appeals) erred in invoking Section 80 of the Finance Act to set aside the penalty under Section 78. The revenue argued that the respondent's failure to file ST-3 returns indicated suppression of facts. However, the respondent had paid a significant portion of the demand before the show cause notice was issued. The revenue claimed that the waiver of penalty by the Commissioner was illegal due to the alleged suppression of facts.

3. On the other hand, the respondent contended that they had made substantial payments towards the demand before the issuance of the show cause notice. The respondent's counsel highlighted that delays in receiving payments from the service receiver caused the delay in discharging the service tax liability. It was emphasized that the respondent, an illiterate civil contractor, had no intention to evade payment. The respondent argued that the penalty waiver by the Commissioner was justified.

4. After considering the arguments from both sides, the Tribunal found that the respondent had paid most of the demand before the show cause notice was issued. The Tribunal noted that the respondent consistently paid service tax as and when payments were received from the service receiver. The Tribunal also took into account the fact that the respondent was an illiterate civil contractor and that mere non-declaration could not be equated to suppression of facts. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) to waive the penalty under Section 78 of the Finance Act, 1994.

5. In conclusion, the Tribunal dismissed the appeal, affirming the decision to set aside the penalty imposed under Section 78 of the Finance Act, 1994. The Tribunal found no grounds to interfere with the Commissioner's decision, considering the circumstances of the case and the respondent's payment history.