2016 (1) TMI 886 - AT - Service Tax

Levy of penalty - appellant has discharged 25% of the amount of service tax on 05/03/2014, while they received the order-in-original on 28/01/2014 - advance payment for construction work - appellant has already discharged service tax liability before issuance of the show cause notice and also discharged interest liability on issuance of the show cause notice. - Held that - the period for discharging service tax and penalty has been extended to 90 days if the value of the service tax is less than ₹ 60 lakhs during any of the years, which I find in this case is to as, per annexure to show cause notice. Accordingly, accepting the amount of penalty paid by the appellant as sufficient compliance to Section 78 of the Finance Act, 1994, the appeal is disposed of.

Summary

Issues:
Setting aside of penalties imposed by the adjudicating authority and upheld by the first appellate authority.

Analysis:
The appeal was against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune-I. The issue revolved around penalties imposed on the appellant, a builder, for not discharging service tax liability on advance payments received for construction work during 2010-11 and 2011-12. The penalties were challenged on the grounds that the appellant had discharged the service tax liability before the show cause notice and interest liability on issuance of the notice. The appellant believed they would succeed in challenging the tax liability provision before the Hon'ble High Court, which they did not discharge during the litigation period. The appellant had paid 25% of the service tax amount as penalty within 90 days of the order-in-original. The appellant did not contest the cum-tax benefit issue.

The Departmental Representative argued that the appellant was aware of the service tax liability on advance payments, especially since they were part of an industry association challenging the provision. The representative contended that there was no justifiable cause for setting aside the penalties, citing a relevant Tribunal judgment. The Tribunal considered both sides' submissions and found the appellant's argument regarding non-discharge of service tax during the litigation period unconvincing. The penalties imposed by the authorities were upheld. However, the Tribunal noted that the appellant had complied with the amended provisions of Section 78 of the Finance Act, 1994, by paying 25% of the service tax amount within the specified time frame. The Tribunal highlighted the relevant provisos of Section 78 and extended the period for penalty payment to 90 days due to the appellant's service tax value being below a certain threshold. Consequently, the Tribunal disposed of the appeal, considering the penalty paid by the appellant as sufficient compliance with the law.