2015 (10) TMI 2289 - AT - Service Tax

Waiver of Penalty under Section 78 Construction Service - Civil Work of Foundation for Drilling Rig Platform Taxable value included material and labour cost which is 75% of amount thus demand of tax cannot be sustained Held that - Considering the period involved in the case and fact that tax has already been paid with interest, penalty is waived Demand of tax and interest upheld Decided partially in favour of assessee.

Summary

Issues Involved:
Confirmation of Service Tax demand, imposition of penalties under the Finance Act, 1994, waiver of penalty, interpretation of case laws, clarification on penalty imposition when tax paid before Show Cause Notice.

Analysis:

Confirmation of Service Tax Demand and Imposition of Penalties:
The Adjudicating authority confirmed a Service Tax demand of Rs. 2,76,597 along with interest and imposed penalties under various provisions of the Finance Act, 1994 for the period between 10.9.2004 to 30.3.2007 under the category of "Construction Services." The Commissioner (Appeals) allowed the option to pay a penalty of 25% of the tax under Section 78 of the Finance Act, 1994. Both the assessee and the Revenue filed appeals against this decision.

Interpretation of Case Laws and Arguments:
The Advocate for the assessee argued that the Construction Services were provided as per a contract/agreement with M/s Oil and Natural Gas Commission Ltd (ONGC), involving activities like Civil Work of Foundation for Drilling Rig Platform, Road, etc. The Advocate contended that the taxable value included material and labor costs, constituting about 75% of the total amount, and thus, the tax demand was not justified. Reference was made to the decision of the High Court in the case of M/s Bajaj Travels Ltd vs. CST 2012.25.STR.41 (Del.) and the decision of the Honorable Supreme Court in the case of CCE&C vs. Larsen & Toubro Ltd 2015.39.STR.913 (SC). It was acknowledged that the assessee had already deposited the entire tax amount along with interest before the issuance of the Show Cause Notice.

Waiver of Penalty and Decision:
The Tribunal noted that since the assessee had already paid the tax along with interest and was not contesting the demand, there was no need to delve into the merits of the case or the cited case laws. The main contention was regarding the imposition of the penalty. Referring to a CBEC letter clarifying penalty imposition when tax is paid before the Show Cause Notice, and considering factors such as the amount involved, the period of the case, and the assertion that the assessee had not collected any amount from customers, the Tribunal decided to waive the penalty. Consequently, the demand of tax along with interest was upheld, and the penalties were set aside. The appeal by the assessee was disposed of with the waiver of penalty, while the appeal by the Revenue was rejected.