2015 (11) TMI 1040 - AT - Service Tax

Benefit of 67% abatement under Notification No. 15/2004-ST, 1/2006-ST - Benefit of Section 80 - commercial or industrial construction service - respondent had not furnished any document to indicate that cost of construction material was included in the amount charged or same were supplied free of cost by service recipient - Held that - Gross amount received by the appellant would have included the cost of material used in connection with construction of commercial shops for Municipal Corporation, Bilaspur. As regards extending the benefit of Section 80 of the Finance Act for setting aside the penalties we find that after allowing the 67% abatement the impugned demand would reduce to about one third of the amount confirmed by the primary adjudicating authority. Further while considering the eligibility of the appellant for the benefit of Section 80. Revenue in its appeal has not been able to bring out any reasonable basis to counter the observations of the Commissioner (Appeals) based on which the benefit of Section 80 ibid was extended by Commissioner (Appeals). In the given circumstances inter alia involving relatively small amount of service tax extension of benefit of Section 80 ibid by Commissioner (Appeals) can scarcely be said to be arbitrary or unreasonable. - Decided against Revenue.

Summary

Issues:
- Availability of 67% abatement under Notification No. 15/2004-ST and 1/2006-ST
- Extension of benefit of Section 80 for setting aside penalties
- Non-furnishing of documents by respondent
- Invocability of extended period
- Interpretation of law regarding service tax liability for work done for local government
- Reasonable cause for not discharging service tax timely

Analysis:

1. Availability of 67% abatement: The Revenue appealed against an order granting the appellant the benefit of 67% abatement under Notification No. 15/2004-ST and 1/2006-ST. The Revenue contended that the appellant did not provide documents to prove the inclusion of the cost of construction material in the amount charged or if the material was supplied free of cost by the service recipient. However, the CESTAT referred to a previous decision and held that even if the value of material supplied free by the service recipient is not included in the assessable value, the abatement of 67% is available. The Commissioner (Appeals) also noted that there were no free supplies, indicating that the gross amount received by the appellant included the cost of material used in construction.

2. Extension of benefit of Section 80: The appellant argued that they were under a bona fide belief that the work done for the local government was not covered under commercial or industrial construction service, making them not liable for service tax. The CESTAT considered the eligibility of the appellant for the benefit of Section 80 and noted that the appellant had shown a bona fide belief and reasonable cause for not discharging service tax timely. Referring to a Karnataka High Court judgment, the CESTAT emphasized that imposition of penalty is not automatic in cases of bona fide disputes regarding tax liability, and the authority must find if there was a reasonable cause for non-compliance with the law before imposing a penalty.

3. Non-furnishing of documents and invocability of extended period: The Revenue argued that the respondent did not furnish ST-3 returns or provide details of services rendered, making the extended period invocable. However, the CESTAT did not find any infirmity in the order that would warrant appellate intervention. The Revenue's appeal was dismissed, and cross-objections were disposed of based on the analysis presented.

In conclusion, the CESTAT upheld the order-in-appeal granting the appellant the benefit of 67% abatement and extending the benefit of Section 80 for setting aside penalties. The judgment highlighted the importance of a bona fide belief and reasonable cause in cases of service tax disputes, emphasizing the authority's discretion in imposing penalties.