2017 (8) TMI 1466 - AT - Service Tax

Commercial or Industrial Construction Services / Construction of Residential Complex Services - period involved is from 16.06.2005 to 30.09.2007 - demand of service tax - Penalties - Held that - The question of levy of service tax on Works Contract Services prior to 01.06.2007 is settled by the judgment of the Hon ble Apex Court in the case of Larsen & Toubro Ltd 2015 (8) TMI 749 - SUPREME COURT - Following the same the demand prior to the period 01.06.2007 is unsustainable and requires to be set aside - appellant is liable to pay service tax along with interest for the period after 01.06.2007. Penalties u/s 76 and 78 of FA - Held that - There were several litigation in various courts disputing the liability to pay service tax on Works Contract Services. The appellant was in bonafide dispute on the same issue - penalties not warranted and is set aside. Appeal allowed in part.

Summary

Issues: Demand of service tax on Commercial or Industrial Construction Services / Construction of Residential Complex Services.

Analysis:

1. Demand of Service Tax: The appellant argued that as per the judgment of the Hon'ble Apex Court in the case of Commissioner Vs. Larsen & Toubro Ltd, the demand for the period prior to 01.06.2007 is not sustainable. The appellant accepted the liability for the period after 01.06.2007 till 30.09.2007 and paid the entire service tax demand for that period. The tribunal, following the precedent set by the Hon'ble Apex Court, held that the demand prior to 01.06.2007 is unsustainable and set it aside. However, the tribunal ruled that the appellant is liable to pay service tax along with interest for the period after 01.06.2007.

2. Penalties Imposed: The appellant requested the waiver of penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994. The tribunal acknowledged that there were multiple litigations disputing the liability to pay service tax on Works Contract Services, and the appellant was genuinely contesting the issue. Citing Section 80, the tribunal held that the penalties imposed under Sections 76 and 78 were unwarranted due to the appellant's reasonable cause for non-payment of service tax. Consequently, the penalties under Sections 76 and 78 were set aside, while the penalty under Section 77 remained unchanged.

3. Final Decision: The tribunal modified the impugned order by setting aside the demand for service tax and interest prior to 01.06.2007. Additionally, the penalties imposed under Sections 76 and 78 of the Finance Act, 1994 were also set aside. The appeal was partly allowed based on these terms, providing relief to the appellant in line with the legal precedents and considerations of bonafide belief and reasonable cause for non-payment of service tax.