2015 (6) TMI 160 - AT - Service Tax

Imposition of penalty - Installation commissioning and testing service - Revenue classified service as repair service - Held that - service has been wrongly classified. An amount of ₹ 4,50,504/- was received by the appellant for painting of 220 M.S. towers. The paint was purchased by the appellant and therefore, the contract has to be treated as works contract and the period involved is 16.06.2005 to 31.03.2006. It was submitted that the cost of the raw materials is ₹ 1,80,201/- and this service cannot be considered as repair service. Even though this claim is not acceptable, this service of painting of MS towers was undertaken for AP Transco which is engaged in transmission of power. The services provided for the purpose of transmission of electricity have been exempted retrospectively under Notification No. 45/2010 and therefore the service tax itself is not leviable. - substantial portion of the amount is not liable to tax at all and the amount paid by the appellant covers the entire demand, interest and a portion of the penalty also. Therefore this is a fit case for waiving the balance amount of penalties if any payable by the assessee by invoking the provisions of Section 80 of the Finance Act 1984 - Decided in favour of assessee.

Summary

Issues:
1. Service tax demand and penalty imposition.
2. Classification of services provided by the appellant.
3. Applicability of exemption under Notification No. 45/2010.
4. Invocation of Section 80 of the Finance Act 1984 for waiving penalties.

Analysis:
1. The appellant, a small contractor facing health issues, submitted written arguments contesting a service tax demand of &8377; 62,013 with a penalty of &8377; 1,000. The appellant claimed the actual tax liability was &8377; 18,200, alleging the remaining amount was forcibly collected. The Tribunal noted the payment of the entire demand on 27.06.2007.

2. The appellant's services involved installation, commissioning, and testing of lubricating pumps, classified as repair services, and painting of M.S. towers. The Tribunal agreed that the painting contract constituted a works contract due to the appellant purchasing the paint. However, services provided to AP Transco for transmission of power were retrospectively exempted from service tax under Notification No. 45/2010.

3. Considering that a significant portion of the amount was not taxable, the Tribunal invoked Section 80 of the Finance Act 1984 to waive any remaining penalties. The Tribunal held that the amounts paid covered the tax, interest, and part of the penalty, relieving the appellant from further payment obligations. The decision clarified that the appellant would neither receive a refund nor be liable for additional tax, interest, or penalties.

This judgment showcases a compassionate approach by considering the appellant's health issues and the retrospective exemption under Notification No. 45/2010 to relieve the appellant from further financial burden, emphasizing the importance of fair treatment and adherence to tax laws.