2014 (2) TMI 1313 - AT - Service Tax

Penalty - Activity of pumping RMC - adjudicating authority considered that the disputed service was newly brought into tax net and there was confusion about the scope of the relevant entry and hence waiving of penalty was justified - Held that - when the demand for tax itself is not sustainable, there cannot be a penalty imposed on the same matter - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxability of pumping ready mixed concrete under entry for Transportation of goods through pipeline or conduit; Imposition of penalty by Commissioner under section 84 of the Finance Act, 1994.

Analysis:

1. The appellant, a manufacturer of ready mixed concrete, supplied the item using vehicles designed for its transportation and pumping at construction sites. The Revenue contended that pumping concrete from the vehicle to the work site fell under the taxable entry for Transportation of goods through pipeline or conduit. A show cause notice was issued for non-payment of service tax, leading to adjudication by the Additional Commissioner, who confirmed the tax demand but did not impose a penalty due to confusion regarding the scope of the relevant entry.

2. The appellant appealed to the Commissioner (Appeals) against the adjudication order. The Commissioner (Appeals) set aside the tax demand, ruling that the activity was not covered by the said entry. The department did not challenge this decision by filing an appeal.

3. Subsequently, the Commissioner of Central Excise, using powers under section 84 of the Finance Act, 1994, reviewed the adjudicating authority's order and imposed a penalty of Rs. 25 lakhs, exceeding the original tax liability of Rs. 22,81,673. The appellant, aggrieved by this penalty, filed an appeal against the Commissioner's order.

4. The appellant's counsel argued that if the tax demand itself was deemed unsustainable, no penalty should be imposed. Therefore, the penalty levied was not justified and should be set aside.

5. The Revenue's representative contended that the penalty was imposed because the adjudicating authority found suppression but did not impose a penalty.

6. After considering the arguments from both sides, the Technical Member found merit in the appellant's argument that when the tax demand was not sustainable, imposing a penalty on the same matter was unjustified. Consequently, the appeal was allowed, and the penalty order was set aside.