2012 (8) TMI 342 - AT - Service Tax

Plea for waiver of penalty imposed u/s 78 - assessee engaged in services of erection, commissioning and Installation contended by Revenue to be falling under work contract category w.e.f. 1.6.2007 - assessee submitted that provisions of section 80 may be invoked since there was confusion in the industry and two authorities of the department itself has given two different conclusions - Held that - While confirming the demand of duty as not contested, penalties imposed under Section 78 are set aside as there was confusion in the field, and non-payment of Service Tax was not on account of any mala fide - Decided in favor of assessee.

Summary

Issues:
1. Classification of Service Tax under erection and commissioning vs. work contract categories.
2. Invocation of Section 80 for penalty imposition due to confusion in industry.
3. Setting aside penalties under Section 78 of the Finance Act.

Classification of Service Tax:
The case involved a dispute regarding the classification of Service Tax under the erection, commissioning category versus the work contract category. The original show-cause notice proposed confirmation of Service Tax under the erection, commissioning category. However, on appeal, the Commissioner (Appeals) agreed that the activity fell under the said category but held that the appellant would be liable to pay Service Tax under the work contract category due to the introduction of the levy of Service Tax on 'work contract' on a specific date. The appellant, represented by a learned Chartered Accountant, acknowledged readiness to pay the Service Tax, which had already been paid. The confusion in the industry due to conflicting conclusions by department authorities was highlighted as a reasonable cause for non-payment of Service Tax.

Invocation of Section 80 for Penalty Imposition:
The appellant's Chartered Accountant argued that the confusion prevailing in the industry, coupled with the contradictory conclusions by department authorities, constituted a reasonable cause for the non-payment of Service Tax. He requested the setting aside of penalties under Section 78 of the Finance Act. The Judicial Member, after confirming the demand of duty, acknowledged the confusion in the field and accepted that the non-payment of Service Tax was not due to any mala fide intent. Consequently, the penalties imposed under Section 78 of the Finance Act were set aside.

Setting Aside Penalties under Section 78 of the Finance Act:
In the final disposition of the appeal, the Judicial Member upheld the demand of duty but set aside the penalties under Section 78 of the Finance Act. The decision was based on the acknowledgment of the confusion in the industry and the absence of mala fide intent in the non-payment of Service Tax. The appeal was thus disposed of in this manner, providing relief to the appellant in terms of penalty imposition.