2016 (1) TMI 653 - AT - Service Tax

Service tax liability under the category of Commercial and Industrial Construction services - penalties imposed - Held that - It is seen from the records that appellant has been constantly disputed the service tax liability without providing any details to the lower authorities is an indicator that the appellant s intention to evade service tax liability. Accordingly, we hold that the penalty imposed by the first appellate authority under Section 78 of the Finance Act, 1994 is correct. However, we find that the first appellate authority has not extended the benefit of paying 25% of the penalty imposed under Section 78 as per the provisions. Reproducing the provisions of Section 78, the first appellate authority should have extended the benefit of payment of reduced penalty to the appellant herein, as it is undisputed that the appellant had already discharged the service tax and interest thereof. In view of this we find that the appellant needs to be extended the benefit of discharge of penalty of an amount of equivalent to 25% of the service tax liability ascertained in this case. We do so. Appellant shall discharge the penalty under Section 78 as imposed by the first appellate authority within 30 days of the receipt of certified copy of this order and report the same to the adjudicating authority and the first appellate authority; failing which, appellant shall be required to discharge the entire penalty as imposed by the first appellate authority.

Summary

Issues involved: Service tax liability classification under 'Commercial and Industrial Construction' vs. 'Erection, Commissioning and Installation Services'; imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.

Service Tax Liability Classification:
The appeal addressed the issue of service tax liability on the appellant for providing construction services to telecom service providers. The Revenue contended that the services fell under 'Commercial and Industrial Construction,' while the appellant argued they should be classified under 'Erection, Commissioning and Installation Services.' The first appellate authority upheld the Revenue's appeal, confirming the service tax amount and imposing penalties. The Tribunal analyzed the definitions under the Finance Act, determining that the construction of foundations for telecom towers constituted a civil structure falling under 'Commercial and Industrial Construction Services.' The Tribunal rejected the appellant's argument that the services should be classified under 'Erection, Commissioning and Installation Services,' as they did not involve erecting structures but laying foundations.

Penalties Imposition:
Regarding the penalties imposed under Sections 77 and 78 of the Finance Act, 1994, the Tribunal upheld the penalty under Section 77 due to the appellant's failure to file returns. For the penalty under Section 78, the Tribunal found that the appellant had not taken registration or informed the department of their activities, indicating an intention to evade service tax liability. While upholding the penalty under Section 78, the Tribunal noted that the appellant should have been granted the benefit of paying 25% of the penalty amount, as they had already discharged the service tax and interest. Consequently, the Tribunal directed the appellant to pay the reduced penalty amount within 30 days, failing which the full penalty would be applicable.

In conclusion, the Tribunal upheld the service tax liability classification under 'Commercial and Industrial Construction Services' and the penalties imposed under Sections 77 and 78 of the Finance Act, 1994. The appellant was directed to pay the reduced penalty amount within a specified timeframe to comply with the order.