2019 (4) TMI 439 - AT - Service Tax

Penalty u/s 77 and 78 of FA - service tax with interest paid on being pointed out - bonafide belief that service tax was not payable - Held that - The appellant has paid the entire service tax along with interest as and when pointed out and has also fully cooperated with the investigation by providing whatever information was sought without delay - the assessee made out a case to seek waiver of penalty under Sec.80 of the Finance Act - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Contesting imposition of penalties under Sec.77 & 78 of the Finance Act, 1994.

Analysis:
The appeal was filed against Order-in-Original No. 20/2010-ST dated 31.03.2010, covering the period from 2005-06 to 2008-09. The appellants were involved in construction services and site formation/ works contract services. The investigation initiated due to activities of another entity led to a show cause notice demanding service tax, interest, and penalties under Sec.77 & 78. The appellant did not contest the duty or interest but sought to set aside the penalties. They cooperated with the investigation, paid differential service tax along with interest promptly, and provided necessary information. The contention was that they were under the impression that service tax was not payable, and penalties should be waived due to their bonafide actions.

The departmental representative supported the penalties imposed and demands raised. However, the appellate tribunal considered both sides' arguments and records. It was noted that the appellant paid the entire service tax with interest promptly and cooperated fully with the investigation. Consequently, the tribunal found that the appellant qualified for penalty waiver under Sec.80 of the Finance Act. Therefore, invoking Sec.80, the penalties under Sec.77 & 78 were set aside. The demand for service tax and interest was upheld, while the penalties were waived.

In conclusion, the appeal was partly allowed by upholding the demand for service tax and interest while setting aside the penalties imposed under Sec.77 & 78. The operative part of the order was pronounced in open court at the conclusion of the hearing.