2012 (8) TMI 567 - AT - Service Tax

Penalty - Erection, Commissioning or Installation service non-payment of service tax Held that - Service liability is not shown separately - invoice is simply VAT/S.T. invoice - Appellants paid the Service Tax promptly as soon as it was pointed out before issue of show cause notice and taking registration also - They have not even questioned whether Sales Tax and Service Tax were leviable on the same transaction - lenient view as contemplated under Section 80 of Finance Act, 1994 - penalties under various Sections of Finance Act, 1994 imposed on the appellants are set aside and interest on service tax & service tax demand are upheld as not contested.

Summary

Issues:
1. Liability of service tax on installation of CNG/LPG Kits.
2. Imposition of penalties under various Sections of Finance Act, 1994.
3. Applicability of Section 73(3) and Section 80 of Finance Act, 1994.

Analysis:
1. The appellant was authorized by the Regional Transport Authority to install CNG/LPG Kits and the Department considered this as "Erection, Commissioning or Installation" service, holding the appellant liable for service tax amounting to Rs. 85,102 for services provided from 1-2-2007 to 31-3-2008. The appellant promptly paid the service tax demand with interest upon notification. However, a Show Cause Notice was issued in January 2009 resulting in penalties under various Sections of the Finance Act, 1994.

2. The Chartered Accountant representing the appellant argued that the appellant had already paid Sales Tax on the full amount charged for the Kits and promptly paid the service tax as well, without contesting the liability. The appellant's intention to comply was evident as they did not question the imposition of both Sales Tax and Service Tax on the same transaction. The Department imposed penalties under Sections 76, 77, and 78 of the Finance Act, but the penalties were partially set aside by the Commissioner (Appeals).

3. The Department contended that the appellant registered and paid the service tax only upon detection by the authorities, suggesting a lack of compliance prior to detection. However, upon review, it was observed that the invoice did not separately show the service liability, and the appellant promptly paid the service tax upon notification, indicating no intention to evade tax. Considering the circumstances, the Tribunal found the case suitable for treating the payment of service tax by the appellant under Section 73(3) of the Finance Act, 1994, and also considered leniency under Section 80. Consequently, the penalties imposed were set aside, while the interest on service tax demand was upheld as uncontested.

This judgment highlights the importance of timely compliance, the interpretation of liability for service tax, and the application of relevant sections of the Finance Act, 1994 to determine penalties and relief in cases of inadvertent non-compliance.