2010 (5) TMI 419 - AT - Service Tax

GTA - appellant is a service receiver - availment of Service Tax credit as well as the benefit of exemption under notification No. 1/2006 S.T - declared in the S.T. 3 return - scrutiny of this S.T. 3 return - Show cause notice issued - Held that - That this is a bona fide mistake, is clear from the fact that this irregularity had happened - this is a case where the provisions of Section 80 can be invoked - there was reasonable cause for short payment of service tax - the impugned order rejecting the appellant s plea for invoking the provisions of Section 80 and upholding the penalty under Section 76 is not correct - appeal filed by the appellant is allowed and the appeal filed by the department is dismissed

Summary

Issues:
1. Interpretation of conditions for availing exemption under Notification No. 1/2006-S.T.
2. Imposition of penalties under Section 76 and Section 78 of the Finance Act, 1994.

Interpretation of conditions for availing exemption under Notification No. 1/2006-S.T.:
The case involved appeals by a construction company and the Commissioner of Central Excise regarding the availing of exemption under Notification No. 1/2006-S.T. The appellant mistakenly took Service Tax credit while also availing the exemption, leading to a show cause notice for denial of the exemption and recovery of Service Tax. The appellant argued that the mistake was unintentional, as they believed the new notification would be applicable from the following month. The Commissioner (Appeals) upheld the Service Tax demand but set aside the penalty under Section 78. The appellant sought to set aside the penalty under Section 76, while the Department aimed to restore the penalty under Section 78.

Imposition of penalties under Section 76 and Section 78 of the Finance Act, 1994:
The appellant contended that there was no mala fide intention in their actions, and the mistake was unintentional. The Department argued that penalties under both Section 76 and Section 78 were rightly imposed, emphasizing that the appellant intentionally availed the exemption. The Tribunal considered the submissions and records, noting that the appellant had declared the availment of Service Tax credit and exemption in their return, indicating no wilful suppression of facts. The Tribunal found that the penalty under Section 78 was not warranted, as there was no intent to evade Service Tax. Regarding the penalty under Section 76, the Tribunal acknowledged the mistake made by the appellant in taking the Service Tax credit while availing the exemption. Considering the circumstances, the Tribunal invoked Section 80, as there was a reasonable cause for the short payment of Service Tax, which was rectified promptly after the adjudication order. Consequently, the Tribunal set aside the penalty under Section 76, allowing the appeal by the appellant and dismissing the Department's appeal.

This detailed analysis of the legal judgment provides a comprehensive overview of the issues involved, the arguments presented by the parties, and the Tribunal's decision based on the interpretation of relevant legal provisions and factual circumstances.