2017 (3) TMI 19 - AT - Service Tax

Levy of Penalty - site formation and clearance, excavation services - Held that - I find that the Hon ble High Court of Karnataka in the case of CST, Bangalore vs. Prasad Bidappa 2012 (8) TMI 749 - KARNATAKA HIGH COURT , has held that when the assessee deposits the entire duty, the proceedings cannot be started against him for imposition of penalties in terms of section 73 of the Act. I also find force in the plea that as the matter was under confusion and was only clarified subsequently, the provisions of section 80 would be attracted, thus not calling for any penalty - Appeal disposed of.

Summary

Issues:
1. Whether penalties imposed on the appellant under sections 76, 77 & 78 of the Finance Act 1994 are justified in a scenario where the appellant paid the entire service tax subsequent to clarification from the Board?
2. Whether the provisions of section 80 of the Finance Act should be invoked in the present case to set aside the penalties imposed?

Analysis:
1. The appellant, engaged in mining activities, was investigated by the Revenue regarding the taxability of their services under "site formation and clearance, excavation services." After registration, the appellant did not pay service tax initially as the service recipient sought clarification from the Board. Upon receiving clarification that the services were taxable, the appellant paid the entire service tax. Subsequently, penalties were imposed on the appellant under sections 76, 77 & 78 of the Finance Act 1994 based on a show cause notice issued in 2008. The appellant's contention was that since the matter was under doubt and the tax was paid after clarification, penalties were unwarranted. The appellant also argued for the application of section 80 of the Finance Act.

2. The Tribunal referred to judgments by the Hon'ble High Court of Karnataka and other cases to support the appellant's position. The High Court rulings established that when an assessee pays the entire duty after clarification, penalties under section 73 of the Act should not be imposed. Additionally, considering the confusion surrounding the matter and the subsequent clarification, the provisions of section 80 were deemed applicable, thereby not necessitating penalties. The Tribunal cited specific cases like Gajanand Aggarwal Vs. CCE Bhubaneswar and others to support this stance.

In conclusion, the Tribunal, led by Ms. Archana Wadhwa, Member (Judicial), set aside the penalties imposed on the appellant. The Tribunal also directed the field officers to examine any differential duty arising from a change in the service tax rate and calculate it accordingly after providing the appellant with an opportunity. The appeal was disposed of in favor of the appellant, emphasizing the applicability of section 80 in the given circumstances.