2011 (7) TMI 847 - AT - Service Tax

Demand - Suppression of facts and non payment of duty - It is seen that the assessee is a small scale civil works contractor who undertakes construction services of residential complexes to Tapadia Construction Aurangabad with the building materials supplied by the builders - In the year 2007-08 he exceeded the limit and the turn over was Rs.15, 07, 000 - When this fact was pointed by the department the said assessee co-operated with the department provided all the information of the services rendered by him and also discharged the service tax duty liability - As soon as the provisions of law were explained the assessee complied with the law - Decided in favor of the assessee

Issues:
1. Reduction in penalty under Section 78 of the Finance Act, 1994.
2. Imposition of penalty under Section 76 for non-payment of Service Tax.
3. Willful suppression of facts by the assessee.
4. Applicability of penalty provisions under Sections 76 and 78.

Analysis:

Issue 1: Reduction in penalty under Section 78
The department appealed against the reduction in penalty under Section 78 imposed by the Commissioner of Central Excise (Appeals). The Commissioner upheld the Service Tax demand and interest but reduced the penalty, citing that the party had paid the amount before the show-cause notice. The department contended that penalties under both Sections 76 and 78 should apply since the duty demand related to a period before the provision excluding Section 76 penalty when Section 78 penalty is imposed came into effect. However, the Tribunal found that the assessee, a civil works contractor, cooperated with the department upon realizing the Service Tax liability, providing necessary information, and paying the duty promptly. The Tribunal concluded that no willful suppression occurred, and the penalty waiver under Section 76 and reduction under Section 78 were justified.

Issue 2: Imposition of penalty under Section 76
The adjudicating authority had imposed a penalty under Section 76 for non-payment of Service Tax. The department argued that since the assessee had not registered or followed prescribed procedures for tax payment, willful suppression could be presumed. However, the Tribunal noted that the assessee, upon being informed of the tax liability, complied with the law promptly, indicating no intention to evade duty. The Tribunal found that the penalty under Section 76 was not warranted in this case.

Issue 3: Willful suppression of facts
The department alleged willful suppression of facts by the assessee due to non-registration and non-payment of Service Tax. However, the Tribunal observed that the assessee, being a small-scale contractor, rectified the compliance lapses upon being informed of the legal requirements, demonstrating no deliberate intent to evade duty. The Tribunal emphasized that the assessee's prompt action upon notification indicated a lack of willful suppression.

Issue 4: Applicability of penalty provisions under Sections 76 and 78
The Tribunal clarified that in cases where an assessee promptly complies with tax obligations upon notification, penalties under Sections 76 and 78 may not both be applicable. It highlighted that the waiver of penalty under Section 76 and the reduction under Section 78 by the lower appellate authority were justified in this instance. The Tribunal dismissed the department's appeal, ruling it devoid of merit due to the assessee's cooperation and lack of willful suppression.

In conclusion, the Tribunal upheld the reduction in penalty under Section 78, rejected the imposition of penalty under Section 76, and found no willful suppression of facts by the assessee. The judgment emphasized the importance of prompt compliance with tax obligations upon notification to avoid penalties under multiple sections of the Finance Act, 1994.

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