2018 (4) TMI 1336 - AT - Service Tax

Penalty - payment of service tax and interest on being pointed out - construction of residential complex - Held that - appellant alongwith various other appellants were litigating the matter before Hon ble High Court against levy of service on the construction of residential complex. Subsequently the appellant have paid substantial amount of service tax - penalty set aside by invoking section 80 - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Service tax on construction of residential complex, imposition of penalty, cum tax benefits.

Analysis:

1. Service tax on construction of residential complex:
The appellant had paid service tax on the construction of a residential complex, except for a small amount of &8377; 6000. The issue in question was whether the residential complex is liable to service tax. The appellant contested the imposition of penalty and sought cum tax benefits. The appellant argued that there was a bona fide belief that the residential complex was not subject to service tax, citing a previous case where the High Court had ordered no coercive steps for recovery of service tax. The Tribunal noted that the appellant, along with others, had been litigating the matter before the High Court. Considering these facts, the Tribunal found that the appellant had made a strong case under Section 80, leading to the setting aside of penalties under Section 77 and 78.

2. Imposition of penalty:
The appellant's counsel argued that penalties under Section 77 and 78 should not be imposed due to the appellant's genuine belief that the residential complex was not liable to service tax. The Tribunal, after considering the submissions from both sides and reviewing the records, agreed with the appellant's argument. The Tribunal found that the appellant had paid a substantial amount of service tax and had a legitimate case under Section 80, leading to the decision to set aside the penalties imposed under Section 77 and 78.

3. Cum tax benefits:
The appellant contended that the demand was confirmed without considering cum tax benefits. The Tribunal acknowledged the settled legal position that cum tax benefits should be extended before computing tax liability. Therefore, the Tribunal directed the adjudicating authority to re-quantify the demand by extending cum tax benefits. The order was modified to include the extension of cum tax benefits for the purpose of re-quantifying the demand. The appeal was disposed of with this modification.

In conclusion, the Tribunal found in favor of the appellant regarding the imposition of penalties under Section 77 and 78, considering the genuine belief and the payment of substantial service tax. The Tribunal also emphasized the importance of extending cum tax benefits before calculating tax liability, directing the re-quantification of the demand accordingly.