2016 (9) TMI 1463 - AT - Service Tax

Penalty u/s 77 and 78 - the appellant had obtained the Service Tax Registration on 14.6.2011 for the services which were taxable w.e.f. 1.7.2010 and did not pay Service Tax for the period July, 2010 to Sept, 2012 - Held that - The issue is covered by the decision in the case of S.P. ASSOCIATES VERSUS COMMISSIONER, CENTRAL EXCISE, PUNE I 2016 (10) TMI 618 - CESTAT MUMBAI , where it was held that the issue of taxability of construction of complex was under doubt right from beginning and various circulars were issued to clarify the position on taxability of the said services. On the taxability of the services, the bonafide belief of the appellant in non payment of service tax in time, is established. The facts are almost identical except that a part of the duty amount of approximately ₹ 1 lakh was paid after the issue of show-cause notice in this case. That does not materially alter the facts - penalties waived. Appeal allowed in part.

Summary

Issues:
1. Appeal against Order-in-Appeal No. PUN-EXCUS-001-APP-0157-15-16 dated 3.12.2005.
2. Service Tax liability for Construction of Residential Complex Service.
3. Applicability of penalty under Sections 77 & 78 of the Finance Act.
4. Invocation of Section 80 of the Finance Act for waiver of penalties.

Analysis:
1. The appellant appealed against Order-in-Appeal No. PUN-EXCUS-001-APP-0157-15-16 dated 3.12.2005 passed by the Commissioner of Central Excise (Appeals), Pune-I. The investigation revealed that the appellant was providing taxable service, Construction of Residential Complex Service, since 2006 but had not paid Service Tax. A show-cause notice was confirmed by both lower authorities, leading to the appeal seeking waiver of penalty under Section 80 of the Finance Act, 1994.

2. The issue of Service Tax liability for Construction of Residential Complex Service was central to the case. The appellant had obtained Service Tax Registration on 14.6.2011 for services taxable from 1.7.2010 but had not paid Service Tax for the period July 2010 to Sept 2012. The Tribunal considered the appellant's argument that the taxability of construction services was under doubt, citing various circulars and legal challenges to the levy. The Tribunal observed that the appellant had a bona fide belief in non-payment of Service Tax in time, supported by their diligent accounting practices. Consequently, the Tribunal upheld the payment of Service Tax and interest but waived penalties under Sections 77 & 78.

3. The Tribunal delved into the applicability of penalties under Sections 77 & 78 of the Finance Act due to non-payment of Service Tax in time. Relying on the precedent set by the case of S.P. Associates, the Tribunal noted that penalties should not be imposed when there is a reasonable cause for waiver under Section 80 of the Finance Act. The Tribunal emphasized that the appellant had paid the Service Tax along with interest before the issuance of the show-cause notice, demonstrating a genuine belief in the non-taxability of the services.

4. In the judgment, the Tribunal invoked Section 80 of the Finance Act to waive the penalties imposed under Sections 77 & 78. The Tribunal highlighted the consistency in its decisions regarding penalties under similar circumstances, emphasizing that penalties should not be imposed when there is a reasonable cause for waiver. The decision was influenced by the Tribunal's assessment that the appellant had shown a bona fide belief in non-payment of Service Tax in time, supported by legal uncertainties surrounding the taxability of construction services.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal, including the Service Tax liability, penalty imposition under relevant sections of the Finance Act, and the invocation of Section 80 for the waiver of penalties based on the appellant's bona fide belief and diligent accounting practices.