2018 (5) TMI 317 - AT - Service Tax

Penalty u/s 77 and 78 - levy of service tax on construction of residential complex - Held that - entertaining the bona fide belief found to be reasonable, considering the fact that the issue of levy of service tax were also under litigation across the country, the appellant has made out a fit case for waiver of penalty under Section 77 and 78 by invoking Section 80 - demand of service tax and interest confirmed and paid by the appellant stand maintained - appeal allowed in part.

Summary

Issues:
1. Liability for service tax on construction of complex.
2. Imposition of penalties under Section 77 and 78.
3. Invocation of Section 80 for waiver of penalties.

Analysis:
1. The appellant, a construction service provider, did not pay service tax leading to a demand notice. The adjudicating authority confirmed a service tax demand of ?79,45,689 for the period 01/07/2010 to 31/03/2012. The appellant paid the tax with interest and faced penalties under Section 77 and 78. The appeal was filed solely on jurisdictional grounds, later seeking to include merit and penalty imposition issues.

2. The appellant, represented by a Chartered Accountant, accepted the tax liability but sought penalty waivers under Section 77 and 78 invoking Section 80. They argued that due to ongoing legal challenges, builders nationwide believed service tax on complex construction was invalid. Citing legal precedents like S P Associates and Trinity Developers, the appellant claimed a genuine belief in non-leviability. The Revenue reiterated the impugned order's findings.

3. The Tribunal focused on determining if penalties under Section 77 and 78 were justified. Considering the legal challenges to service tax on complex construction, including the Maharashtra Chamber of Housing Industry case and the Suresh Kumar Bansal judgment, the Tribunal found the appellant's bona fide belief reasonable. Given the widespread litigation on this issue, the Tribunal granted penalty waivers under Section 80 while upholding the service tax and interest demands.

In conclusion, the penalties imposed by lower authorities were set aside, maintaining the service tax and interest payments. The Tribunal partially allowed the appeal based on the appellant's reasonable belief in the non-leviability of service tax on construction services amidst ongoing legal disputes across the country.