2017 (4) TMI 160 - HC - Service Tax

Penalty u/s 73 of the Act - invocation of section 80 - contract of construction works - Held that - The Tribunal rightly held that if the service tax liability and the interest thereon is discharged on the direction of the Central Excise officers, there was no need to issue a SCN - In the circumstances of the case, we do not find any reason to interfere with the order of the Tribunal in which the Tribunal has exercised the discretion in favour of the respondent by invoking the provisions of Section 80 of the Act - appeal dismissed - decided against Revenue.

Summary

Issues:
Challenge to order of Customs Excise and Service Tax Appellate Tribunal partly allowing appeal and invoking Section 80 of Finance Act, 1994 to delete penalty under Section 73.

Analysis:
The case involved a central excise appeal where the appellant department contested the Tribunal's decision to set aside the penalty imposed on the respondent under Section 73 of the Finance Act, 1994. The respondent, engaged in construction activities, had undertaken projects for different entities but failed to discharge service tax liabilities. The Tribunal upheld the demand for service tax but ruled out the imposition of penalty based on Section 80 of the Act.

The appellant argued that penalties should not have been set aside as the respondent had not paid the full service tax amount. However, the Tribunal found that the respondent had paid a significant portion of the dues before the show cause notice was served, indicating a bona fide belief regarding tax liability. The Tribunal applied Section 80 of the Act, emphasizing the need to consider reasonable cause for non-payment of service tax.

The court upheld the Tribunal's decision, noting that the respondent had acted in good faith regarding tax obligations for one project. The court agreed with the Tribunal's interpretation of Section 80, which grants discretion to authorities regarding penalty imposition. The court differentiated this case from previous judgments related to Section 11AC of the Central Excise Act, highlighting the distinct nature of Section 80's provisions.

Ultimately, the court dismissed the central excise appeal, finding no substantial question of law for consideration. The judgment affirmed the Tribunal's application of Section 80 and the exercise of discretion in favor of the respondent, leading to the rejection of the appellant's challenge to the penalty set-aside decision.