2016 (9) TMI 1543 - AT - Service Tax

Imposition of penalty - conversion of classification of services being provided from construction of residential complex services to work contract services - composite scheme - HELD THAT - Admittedly with the introduction of work contract service the appellants switch to the same under intimation to the Revenue. It is not the case where mis-statement, or suppression was made by the assessee, thus reflecting upon their mala fide. To claim the classification under a particular head which may not be appropriate, cannot lead to any imposition of penalty on the assessee - penalty set aside. Quantification of service tax - HELD THAT - The entire consideration received by the service provider has to be treated as cum duty and the benefit of the same has to be extended - the lower authorities are directed to recalculate service tax amount, after extending the cum-tax benefit to the assessee. Appeal disposed off.

Summary

Issues:
Challenge to imposition of penalty based on classification of services and calculation of service tax.

Analysis:
The appellants, registered under Service Tax as construction of residential complex services, switched to work contract services post-introduction of work contract service. Revenue objected, leading to proceedings resulting in demand confirmation, interest imposition, and penalty. Appellants contested penalty imposition, arguing the adoption of work contract services was based on bona fide belief, not mala fide, hence penalty unjustified. They also disputed service tax calculation, asserting the entire gross value should be considered as cum tax value for quantification.

The Tribunal acknowledged the appellants' stance, noting the switch to work contract services was done with Revenue intimation, without mis-statement or suppression, indicating no mala fide intent. Merely choosing an inappropriate classification does not warrant penalty imposition. Consequently, the penalty imposed was set aside. Regarding service tax quantification, the Tribunal emphasized the established principle that the entire consideration received by the service provider must be treated as cum duty, extending the benefit to the assessee. Therefore, the impugned order was overturned, instructing lower authorities to recalculate the service tax amount by providing the cum-tax benefit to the appellants.

In conclusion, the appeal was disposed of in favor of the appellants, with the penalty imposition annulled and directions given for recalculating the service tax amount in line with the cum-tax benefit principle.