2018 (9) TMI 1372 - AT - Service Tax

Rate of duty - Works Contract Service - case of appellant is that the rate of duty for composition scheme taken into consideration for the year 2007-08 while arriving at the decision by learned Commissioner (Appeals) was 4.12% adv. whereas during the year 2007-08 the rate of service tax under composition scheme was @ 2.06% adv. of the consideration received by the service provider. Held that - The matter is remanded back to the Original Authority to examine whether during the year 2007-08 the rate of service tax was @ 2.06% under composition scheme and if so re-calculate the service tax payable by the appellant for the year 2007-08 - penalties are set aside as there are no malafide intent - appeal allowed in part and part matter on remand.

Summary

Issues:
1. Calculation of service tax rate for Works Contract Service for the year 2007-08.
2. Validity of penalties imposed under Sections 77(1)(a) and 78 of the Finance Act, 1994.

Issue 1: Calculation of service tax rate for Works Contract Service for the year 2007-08:
The appellant provided 'Works Contract Service,' and a show cause notice was issued with a confirmed demand. The Commissioner (Appeals) accepted some contentions of the appellant and modified the original order. However, the appellant contended that the rate of duty considered for the composition scheme for 2007-08 was incorrect. The Tribunal remanded the matter to the Original Authority to verify if the correct rate of service tax under the composition scheme for 2007-08 was 2.06%, not 4.12%. The Tribunal directed a recalculation of the service tax payable for that year based on the correct rate. The Commissioner (Appeals) found no mala-fide on the appellant's part regarding this issue.

Issue 2: Validity of penalties under Sections 77(1)(a) and 78 of the Finance Act, 1994:
The Commissioner (Appeals) set aside the penalty imposed under Section 77(1)(a) of the Finance Act, 1994, as there was no mala-fide intention on the appellant's part. However, the penalty under Section 78 was upheld by the Commissioner (Appeals). The Tribunal disagreed with this decision, stating that since there was no mala-fide intention found, the penalty under Section 78 was not sustainable. Consequently, the Tribunal set aside the penalty imposed under Section 78 of the Finance Act, 1994. The Tribunal allowed the appeal in part, not interfering with the rest of the order.

This judgment from the Appellate Tribunal CESTAT ALLAHABAD addressed two key issues. Firstly, it dealt with the correct calculation of the service tax rate for Works Contract Service for the year 2007-08. The Tribunal remanded the matter to the Original Authority to verify the applicable rate under the composition scheme, directing a recalculation of the service tax accordingly. Secondly, the judgment analyzed the validity of penalties imposed under Sections 77(1)(a) and 78 of the Finance Act, 1994. The Tribunal found no mala-fide intention on the part of the appellant, leading to the setting aside of the penalty under Section 78. The appeal was allowed in part, with the Tribunal not interfering with the remaining aspects of the order.