2017 (3) TMI 310 - AT - Service Tax

Imposition of penalty u/s 76 of FA - works contract service - doubts regarding the interpretation of relevant provisions - invocation of section 80 - bonafide belief - Held that - It has to stated that even though the appellants have been issued a SCN for the earlier period, the same was being litigated by the appellant and the appellants has accepted the liability to discharge service tax on the subject services only after the order passed by the Commissioner (Appeals) dated 29.03.2013. The subsequent SCN in respect of the present appeal was issued on 04.09.2012 which is much before the order of Commissioner (Appeals). Therefore the issue was under litigation so far as the appellant is concerned - benefit of section 80 extended to appellant - penalty set aside - appeal allowed - decided in favor of appellants.

Summary

Issues:
Imposition of penalty under Section 76 of Finance Act.

Analysis:
The appellant was engaged in providing works contract services and registered with the service tax department. They were issued a show cause notice for the period July 2010 to June 2011, leading to the confirmation of service tax, interest, and penalty under Section 76. The Commissioner (Appeals) set aside the penalty imposed under Section 76 by invoking Section 80 of the Finance Act, 1994. A subsequent show cause notice for the period July 2011 to June 2012 was issued, adopting the grounds from the earlier notice. The original authority confirmed the demand, interest, and penalty under Section 76, leading to the current appeal against the penalty imposition.

The appellant's counsel argued that the Commissioner (Appeals) had previously granted waiver of penalty under Section 80 for doubts regarding the interpretation of relevant provisions and the appellant's belief about not being liable to pay service tax. The appellant had communicated the liability to the client and paid the service tax, depositing the collected amount to the Government. The counsel contended that the appellant should not be denied the benefit of Section 80 for the subsequent notice issued before the previous order.

The respondent reiterated the findings in the impugned order, stating that the appellant was fully aware of the service tax liability at the time of the current show cause notice issuance. The Commissioner (Appeals) rightly did not invoke Section 80 due to the appellant's awareness and payment of service tax with interest.

The Tribunal noted that the Commissioner (Appeals) had erred in not extending the benefit of Section 80 for the subsequent period, despite granting it for the earlier period. The appellant had accepted the liability post the Commissioner's order for the earlier period, and the subsequent notice was issued before that order. The issue was under litigation from the appellant's perspective. Consequently, the Tribunal held that the penalty under Section 76 was unjustified, setting it aside while confirming the demand for service tax and interest. The appeal was allowed with consequential reliefs, if any.