2013 (4) TMI 629 - AT - Service Tax

Construction of civil structures and erection of specific equipments - service tax liability - imposition of penalties under Sections 76, 77 & 78 of Finance Act, 1994 - Held that - The appellant had voluntarily paid almost 80% of the amount and balance amount before issuance of show cause notice. It is also to be noted that the appellant herein is a proprietary concern and could not have been aware about the intricacy of discharge of Service Tax liability within the time period. In my view, this is a fit case for invoking the provisions of Section 80 of Finance Act, 1994. Accordingly, the provisions of Section 80 of Finance Act, 1994 invoked and set aside the penalties imposed on the appellant by the first appellate authority. In favour of assessee.

Summary

Issues:
- Service Tax liability payment based on contract agreement with BSNL
- Delay in discharging Service Tax liability
- Show cause notice for penalties under Sections 76, 77 & 78 of Finance Act, 1994
- Dropping of penalty proceedings by adjudicating authority
- Appeal by Revenue seeking imposition of penalties
- Applicability of Section 80 of Finance Act, 1994 for waiver of penalties

Analysis:

The appeal before the Appellate Tribunal CESTAT Ahmedabad pertains to the non-discharge of Service Tax liability by the appellant during the period of 2005-2006 to 2008-2009. The appellant, engaged in construction and erection work for BSNL, paid a significant portion of the Service Tax voluntarily before any investigation was initiated. However, the remaining amount was paid belatedly, leading to the Revenue authorities issuing a show cause notice for penalties under Sections 76, 77 & 78 of the Finance Act, 1994. The adjudicating authority confirmed the demand and appropriated the amount paid but dropped the penalty proceedings. Subsequently, the Revenue appealed against the dropping of penalty proceedings, resulting in the first appellate authority imposing penalties under the mentioned sections.

Upon hearing both parties and examining the records, the Tribunal noted the adjudicating authority's rationale for dropping the penalty proceedings. The adjudicating authority emphasized that penalizing an assessee who voluntarily rectified their lapses could deter others from coming forward for tax compliance. The Tribunal observed that the issue at hand primarily concerned the waiver of penalties, governed by Section 80 of the Finance Act, 1994. It was clarified that the provisions of Section 80 encompass the waiver of penalties under Sections 76, 77 & 78.

The Tribunal acknowledged the appellant's proactive payment of a significant portion of the Service Tax and the subsequent payment of the remaining amount before the show cause notice was issued. Considering the appellant's limited awareness as a proprietary concern, the Tribunal deemed it appropriate to invoke the provisions of Section 80 of the Finance Act, 1994. Consequently, the Tribunal set aside the penalties imposed by the first appellate authority under Sections 76, 77 & 78, thereby allowing the appeal and relieving the appellant from the penalty burden.

In conclusion, the Tribunal's judgment revolved around the application of Section 80 for the waiver of penalties in a case where the appellant had voluntarily paid a substantial portion of the Service Tax before any formal proceedings commenced. The decision highlighted the importance of encouraging tax compliance by recognizing and rewarding proactive rectification of compliance lapses by taxpayers.