2017 (6) TMI 1180 - AT - Service Tax

Penalties u/s 77 and 78 - non-payment of service tax in time - services of construction of complex - Held that - on the taxability of the services, the bona fide belief of the appellant in non payment of service tax in time, is established. It is not disputed that the appellant have recorded the entire transaction of their services in their books of accounts - the appellant have shown the reasonable cause for waiver of penalties invoking u/s 80 of the FA - penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Levy of service tax on construction of residential complex.
2. Imposition of penalties under Section 77 & 78 of the Finance Act, 1994.
3. Bonafide belief of the appellant regarding service tax liability.
4. Applicability of judgments and circulars on taxability of construction services.

Analysis:
1. The appellant, engaged in construction of residential complexes, faced a demand for service tax for a specific period. The lower authorities confirmed the demand and imposed penalties under Sections 77 & 78 of the Finance Act, leading the appellant to approach the Tribunal for redressal.

2. The appellant's counsel argued that there was uncertainty and confusion regarding the liability to pay service tax on construction services. They contended that they acted under a bonafide belief of non-liability, supported by timely payment of the entire demand along with interest before the show-cause notice. Reference was made to a previous decision to support their case.

3. The Tribunal acknowledged the uncertainty surrounding the taxability of construction services, noting challenges to the constitutional validity of such levies in previous cases. The appellant's bonafide belief was deemed established due to ongoing legal challenges and the issuance of circulars clarifying the tax position. The Tribunal found merit in the argument that penalties should be waived under Section 80 of the Finance Act due to reasonable cause shown by the appellant.

4. In line with previous judgments and consistent views of the Tribunal, penalties under Sections 77 & 78 were waived invoking Section 80 of the Finance Act. However, the payment of service tax and interest by the appellant was upheld. The Tribunal set aside the impugned order and allowed the appeal, citing the appellant's reasonable cause for the waiver of penalties in light of the prevailing legal uncertainties.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision, providing a comprehensive understanding of the case's legal intricacies and outcomes.