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2016 (2) TMI 871 - AT - Service TaxLevy of penalty - proprietary concern - it was pleaded that the definition given for the services in question namely Commercial or Industrial Construction defined under Section 65(105)(zzq) of the Finance Act, 1994 earlier used by words Commercial Concern which was substituted by wordings by any other person by Finance Act, 2006 dated 18.4.2006 with effect from 1.5.2006, and therefore, the respondents had been under the impression that they being proprietary concern were not covered by wordings commercial concern and were consequently not liable to payment of service tax. Held that - it is clear that there were sufficient reasons for the respondents in bona fidely believing that they were not liable to service tax during the relevant period especially when we view the amendments in the definition of Industrial Construction service made on 28.4.2006 by the Finance Act, 1994 made effective with effect from 1.5.2006 and the C.B.E.C s letter No. 334/4/2006-TRU dated 28.2.2006; thus invoking the provisions of Section 80 of the Finance Act and the provisions of Section 73(3) of the Finance Act, 1994, the respondents case on non-imposition of penalty is sustainable and the appeal filed by the Revenue deserves to be rejected. - Decided against the revenue.
Issues:
1. Whether the Order-in-Appeal passed by the Commissioner (Appeals) should be set aside due to suppression of facts by the respondents. 2. Whether penalties under Sections 76, 77 & 78 of the Finance Act, 1994 are imposable on the respondents. 3. Whether the respondents' belief that they were not liable to pay service tax was bona fide. 4. Whether the respondents are entitled to non-imposition of penalty under Section 80 of the Finance Act, 1994. Analysis: Issue 1: The appellant, Commissioner of Central Excise and Service tax, Cochin, argued that the Order-in-Appeal should be set aside due to suppression of facts by the respondents, M/s Saju Engineering Company. The appellant contended that the Preventive Unit's investigation revealed the suppression of facts by the respondents, justifying the imposition of penalties under Sections 76, 77 & 78 of the Finance Act, 1994. Issue 2: The respondents, M/s Saju Engineering Company, argued that they were not liable to pay service tax due to changes in the definition of "Commercial or Industrial Construction" under the Finance Act, 1994. They cited various case laws and amendments to support their belief. The respondents claimed they promptly paid the taxes with interest upon being informed of their liability, indicating a lack of willful suppression or misstatement of facts. Issue 3: The Tribunal considered whether the respondents' belief regarding their service tax liability was bona fide. It was noted that the respondents promptly paid the dues upon being informed by the Department, indicating a lack of willful suppression. The Tribunal found that the respondents were misled by incorrect advice regarding their tax liability and had promptly rectified the situation upon being made aware of their obligations. Issue 4: The respondents argued for the non-imposition of penalties under Section 80 of the Finance Act, 1994, claiming they were entitled to such relief. They contended that their case fell within the provisions of Section 80, which warranted the non-imposition of penalties. The Tribunal, after considering all facts and circumstances, agreed with the respondents' arguments and held that the appeal filed by the Revenue should be rejected. In conclusion, the Tribunal found in favor of the respondents, holding that their belief of not being liable for service tax was bona fide. The Tribunal also upheld the non-imposition of penalties under Section 80 of the Finance Act, 1994, based on the circumstances and legal provisions presented during the proceedings.
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