2018 (1) TMI 115 - AT - Service Tax

Abatement - Erection, Commissioning & Installation services - N/N. 1/2006-ST dated 01.03.2006 - denial on the ground that the conditions enumerated therein have not been fulfilled for claiming the benefit of abatement - Held that - since the admitted fact is that the appellant had not supplied plant, machinery equipment etc. and only undertook the job of erection commissioning and installation of the capital items installed in the factory of the service receiver, the condition of said notification, in totality has not been fulfilled, in order to get the benefit of abatement provided there under - denial of benefit of abatement are proper and justified. Penalty - Held that - since the issue involves interpretation of N/N. 01/2006-ST dated 01/03/2006, the benefit of Section 80 of the Act should be extended for non-imposition of penalties under various provisions of the Act - penalties set aside. Appeal allowed in part.

Summary

Issues:
Claim of abatement under Notification No. 1/2006-ST dated 01.03.2006 for insulation job work undertaken by the appellant in the factory of the service receiver. Bar on limitation period for show cause notice issuance.

Analysis:
The appellant claimed abatement under Notification No. 1/2006-ST dated 01.03.2006 for providing insulation services in the factory of the service receiver. The Department denied the abatement benefit, stating that the conditions of the notification were not fulfilled as the appellant did not supply plant, machinery, or equipment. The appellant argued that the insulation work was essential for the functionality of the installed machinery and should qualify for abatement. Additionally, the appellant contended that the show cause notice issued by the Department was beyond the normal limitation period under Section 73 of the Finance Act, 1994.

The Tribunal examined the notification and noted that to avail abatement, both conditions of supplying plant, machinery, etc., and undertaking erection, commissioning, or installation work must be met. As the appellant did not supply any capital items but only performed installation work in the factory of the service receiver, the Tribunal held that the conditions of the notification were not entirely fulfilled, justifying the denial of abatement.

Regarding the limitation aspect, the Department argued that the show cause notice was issued based on information obtained through an audit, as the appellant did not disclose the insulation work voluntarily. The Tribunal found that since the Department learned about the appellant's activities for the first time during the audit, the show cause notice was not time-barred. Consequently, the submission that the proceedings were barred by limitation was dismissed.

Considering the complexities in interpreting Notification No. 1/2006-ST dated 01.03.2006, the Tribunal extended the benefit of Section 80 of the Act to waive penalties under various provisions. The impugned order denying abatement under the notification was upheld, but the penalties imposed under Sections 76, 77, and 78 of the Act were set aside, allowing the appeal partially.

In conclusion, the Tribunal found no infirmity in denying the abatement benefit under the notification but decided to annul the penalties imposed on the appellant. The appeal was disposed of accordingly.