2017 (3) TMI 1369 - AT - Service Tax

Works contract - non-payment of service tax - the appellant has not been given the cum tax benefit as no service tax was collected from service recipient M/s Jaya Jyothi Cements Pvt. Ltd. - Held that - In the case of KNR Contractors 2010 (10) TMI 438 - CESTAT BANGALORE it is observed by the Tribunal that before proceeding to impose penalty the authority Is expected to ascertain whether the assessee has established reasonable grounds for failure/ default of the assessee. The matter was then remanded for considering the issue whether the benefit of Section 80 can be extended - In the present case even after the conduct of investigation the appellant has not discharged the service tax liability along with interest even though they were aware they are liable to pay the service tax. When the appellant contends that they have to be given cum tax benefit they cannot raise the contention that the service tax has not been received from the service recipient The matter is remanded to the adjudicating authority to consider the issue of cum duty benefit only and revise the demand accordingly if eligible for the benefit. The penalties will then stand revised accordingly - appeal allowed in part by way of remand.

Summary

Issues:
Appeal against Order-in-Appeal upholding demand, interest, and penalties imposed by adjudicating authority.

Detailed Analysis:

Issue 1: Demand of Service Tax
The appeal was filed against the Order-in-Appeal upholding the demand, interest, and penalties imposed by the adjudicating authority. The appellants provided various works to M/s Jaya Jyothi Cements Pvt. Ltd. and were registered under work contract services. The Anti Evasion Wing found non-payment of service tax liability by the appellants. Show Cause Notices were issued for two periods, and penalties were imposed under different sections of the Finance Act, 1994. The Commissioner (Appeals) upheld the penalties, leading to the appeal.

Issue 2: Appellant's Arguments
The appellant's counsel argued that non-payment of service tax was due to M/s. Jaya Jyothi Cements Pvt. Ltd. not paying for the services rendered. They claimed the service tax was not received, leading to a misunderstanding regarding payment obligations. The appellant sought the benefit of Section 80 to waive penalties. They referenced a Tribunal order and legal judgments to support their arguments.

Issue 3: Respondent's Position
The respondent reiterated the findings of the impugned order, emphasizing the penalties imposed were justified. The respondent highlighted the appellant's collection of service tax but failure to remit it to the government. The respondent argued that penalties under different sections were reasonable and appropriate based on the facts of the case.

Issue 4: Tribunal's Decision
The Tribunal acknowledged the appellant's argument regarding the cum tax benefit and remanded the issue to the adjudicating authority for verification. The Tribunal also considered the penalties imposed, distinguishing the case from precedent where penalties were waived due to different circumstances. The Tribunal found no grounds to interfere with the penalties imposed but directed a revision based on the cum tax benefit, along with a reduced penalty of 25% as provided by law.

In conclusion, the Tribunal partly allowed the appeals, remanding the matter for consideration of the cum tax benefit and revision of penalties accordingly. The adjudicating authority was instructed to provide the reduced penalty as per the law.