2016 (12) TMI 1331 - AT - Service Tax

Waiver of penalty imposed u/s 77 & 78 of the FA, 1994 - Construction of Residential Complex Services - benefit of doubt - no suppression of facts - Held that - from Section 73(3) of the Finance Act, 1994 , it is clear that, if the assessee pays the Service Tax along with interest, no show-cause notice should be issued, when show-cause notice itself is not warranted, no adjudication is also required and therefore there is no question of imposition of any penalty - Taking into consideration the conduct of the appellant regarding immediate payment of Service Tax along with interest as well as the circumstances that the matter was under litigation in the court of law, the appellant has been able to show the reasonable cause for non-payment of Service Tax in time. It is also noted that the appellant did not try to hide anything, as the data of taxable value was correctly declared by the appellant in the books of account - waiver of penalty justified - also invocation of section 80, justified - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Imposition of penalties under Section 77 & 78 of the Finance Act, 1994.
2. Applicability of penalties in the case of non-payment of Service Tax.
3. Interpretation of Section 73(3) of the Finance Act, 1994.
4. Legal position on taxability of 'Construction of Residential Complex Services.'

Imposition of Penalties under Section 77 & 78:
The appeal challenged the penalties imposed under Section 77 & 78 of the Finance Act, 1994, by the Commissioner of Central Excise (Appeals). The appellant sought relief from the penalty amounting to ?43,08,358 under Section 78 and ?10,000 under Section 77(1)(a). The adjudicating authority had confirmed the demand for Service Tax and penalties, leading to the appeal before the Commissioner (Appeals).

Applicability of Penalties in Case of Non-Payment of Service Tax:
The appellant, through their representative, argued that they were not contesting the tax liability but were disputing the imposition of penalties. They highlighted the confusion and uncertainty surrounding the taxability of 'Construction of Residential Complex Services' during the period in question. The appellant contended that they promptly paid the entire Service Tax liability along with interest upon being informed by the Department, even before the issuance of a show-cause notice. They cited legal precedents to support their case for the waiver of penalties.

Interpretation of Section 73(3) of the Finance Act, 1994:
The Tribunal analyzed Section 73(3) of the Finance Act, 1994, which states that if an assessee pays the Service Tax along with interest before the issuance of a show-cause notice, no notice should be served. In this case, the appellant's immediate payment of Service Tax upon notification by the Department, without any protest, was considered a valid reason for not issuing a show-cause notice. The Tribunal concluded that since no show-cause notice was warranted, there was no need for adjudication, and consequently, no penalties should be imposed.

Legal Position on Taxability of 'Construction of Residential Complex Services':
The Tribunal acknowledged the litigation surrounding the taxability of 'Construction of Residential Complex Services,' as evidenced by the involvement of the Maharashtra Chamber of Housing and Industry in legal proceedings. Considering the circumstances, including the immediate payment of Service Tax by the appellant upon notification, the Tribunal found that the appellant had demonstrated a reasonable cause for the delay in payment. The Tribunal held that the appellant had correctly declared the taxable value in their books of account and had not attempted to conceal any information. Consequently, the Tribunal ruled in favor of the appellant, setting aside the penalties imposed under Section 77 & 78 and allowing the appeal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT MUMBAI provides insights into the issues of penalties under the Finance Act, interpretation of relevant legal provisions, and the legal position on taxability, resulting in a favorable outcome for the appellant.