2015 (11) TMI 1184 - AT - Service Tax

Small service provider exemption upto 10 lakhs - clubbing of clearance - another proprietorship firm run by the son of the assessee - work of civil construction and site formation service - appellant had neither registered with the Service Tax Department nor was paying tax nor had charged service tax in its invoices - Held that - Clubbing of the service provided by Balaji Construction is evidently wrong. The appellant had produced the copy of Income Tax records of the proprietor of Balaji Construction along with the PAN number. But without making further inquiry the same was rejected. Further the Revenue has relied upon the statement of an uneducated person, who is not aware of the provisions of law and does not understand the impact of the statements he had given. In such circumstances, I hold that the clubbing of service provided by Balaji Construction (Prop. Balraj Malayyapa Besta) is vitiated and the same is set aside. The next ground urged is that threshold exemption have not been allowed to the appellant, as the appellant is a small contractor. So far this issue is concerned the matter is remanded back to the adjudicating authority to examine the allowability of the threshold limit as provided under the relevant notification and allow the same. So far the penalties are concerned, I find that there is reasonable cause for not making compliance with the provisions of the Act and the Rules. The contention of the appellant have not been found wrong that he was not aware being uneducated and engaged in labourer oriented job. Accordingly, I set aside the penalty imposed under Section 77 and 78 of the Finance Act. - Decided partly in favour of assessee.

Summary

Issues:
1. Appellant's liability for service tax on civil construction and site formation services.
2. Clubbing of services provided by different entities.
3. Imposition of penalties under sections 76, 77, and 78 of the Finance Act.
4. Availability of threshold exemption for a small contractor.

Analysis:
1. The appellant, engaged in civil construction and site formation services, was found to have not registered for service tax initially but started charging service tax from April 2008 after being advised by the Preventive Team. A show-cause notice was issued for demanding service tax for the period October 2004 to September 2009, along with penalties under various sections of the Finance Act. The appellant did not respond to the notice, and the demand was confirmed, leading to an appeal before the Commissioner (Appeals).

2. The Commissioner (Appeals) upheld the demand and penalties, considering the services provided by the appellant and another entity under the same proprietorship. The appellant contended that the clubbing of services was incorrect, as he had started his business separately in 2006. The Commissioner rejected income tax records as evidence and relied on the statement of the proprietor, imposing penalties under sections 77 and 78 but deleting the penalty under section 76. Dissatisfied, the appellant appealed to the Tribunal.

3. The Tribunal found the clubbing of services to be erroneous and set it aside, directing a reexamination of the threshold exemption for the appellant as a small contractor. Penalties under sections 77 and 78 were revoked due to the appellant's lack of awareness of tax laws and the nature of his work. The penalty under section 76, previously set aside by the Commissioner, was not reinstated. Consequently, the appeal was partially allowed, and the matter was remanded for further consideration of the threshold exemption.

4. In conclusion, the Tribunal ruled in favor of the appellant on the issue of clubbing services and penalties, emphasizing the appellant's lack of education and awareness as a mitigating factor. The case highlights the importance of considering individual circumstances and knowledge levels when imposing tax liabilities and penalties, ensuring fair treatment for all parties involved.