2018 (7) TMI 785 - AT - Service Tax

Benefit of N/N. 15/2004-ST - inclusion of value of free supplies used in providing the output Services - The case of the department is that the appellant have misused the benefit of N/N. 15/2004-ST by not including the value of free supplies used in providing the output Services - CENVAT Credit availed - Held that - Before availing the CENVAT Credit the issue was remained in their favour in terms of larger bench judgment in the case of Bhayana Builders 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , however, the appellant had availed the CENVAT Credit paid on the Service Tax, since availed the CENVAT Credit even though the judgment of Bhayana Builders was in their favour on the point of inclusion of free supply material. But since they availed the credit they were no longer entitled for the exemption N/N. 15/2004-ST. Penalty - Held that - There is no question of any malafide intention on the part of the Appellant. Hence, penalties imposed under Section 76 and 78 are clearly not sustainable in terms of Section 80 of the finance Act, 1994 - penalties set aside. Appeal allowed in part.

Summary

Issues:
1. Entitlement for exemption under Notification No. 15/2004-ST.
2. Imposition of penalties under Section 76 and 78.

Entitlement for exemption under Notification No. 15/2004-ST:
The appeal arose from a Commissioner's order confirming the demand of Service Tax, penalties, and interest, alleging misuse of Notification No.15/2004-ST by not including the value of free supplies in providing Commercial and Industrial Construction Services. A previous Tribunal order was set aside, leading to the current appeal. The appellant contended they had availed CENVAT Credit and paid the Service tax liability, citing a precedent in their favor. The Revenue argued that the appellant violated the conditions of the Notification, justifying penalties. The Tribunal noted the appellant's compliance post-dispute, including availing CENVAT Credit and paying the Service Tax. Despite the Revenue's claim, the Tribunal found in favor of the appellant due to the precedent's applicability. Consequently, penalties under Section 76 and 78 were deemed unsustainable, and the appeal was partly allowed.

Imposition of penalties under Section 76 and 78:
The Revenue contended that penalties were warranted due to the appellant's non-inclusion of free supply materials, violating Notification conditions. However, the Tribunal ruled in favor of the appellant, emphasizing their compliance post-dispute and the precedent's support. Consequently, penalties under Section 76 and 78 were set aside, with the demand for Service Tax and interest confirmed and paid by the appellant deemed valid. The Tribunal's decision highlighted the lack of malafide intention on the appellant's part, given the circumstances and legal precedents involved. The judgment was pronounced on 05.06.2018 by the Tribunal, providing clarity on the issues raised and the final disposition of the appeal.