2019 (4) TMI 1560 - AT - Service Tax

Imposition of penalty - tax liability with interest discharged before issuance of SCN - Bonafide belief - HELD THAT - The appellant could have entertained a bonafide belief that the services rendered by them were under the works contracts as they had undertaken various jobs of fabrication, painting of works with the paint purchased by them and paid works contracts tax to the State Government. Hence the entire execution of the contract by them to various customers may have got covered under works contract which was not taxable during the period in question - This is a fit case for invocation of section 80 and setting aside of penalty - the tax liability and interest thereof is upheld - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Tax liability on erection, commissioning, or installation services rendered by the appellant, imposition of penalties based on the tax liability, applicability of works contract services, invocation of Section 80 of the Finance Act, 1994 to set aside penalties.

Analysis:
The appeal was filed against Order-in-Appeal No.15/2009 (H-I) ST dated 08.12.2009, concerning the tax liability of the appellant for services rendered between 10.09.2004 to 30.09.2007. The Revenue authorities alleged that the appellant did not discharge the service tax liability for various works undertaken during this period. The appellant argued that certain services rendered were taxable only from 01.05.2006 and that service tax was payable on 33% of the value of consideration charged. Both lower authorities confirmed the tax liability, interest, and penalties. The appellant, while not contesting the tax liability, sought the setting aside of penalties, claiming a genuine belief that the services fell under works contract services. The appellant referenced a decision of the Hon'ble High Court of Punjab & Haryana to support this claim.

The Tribunal upheld the tax liability and interest, as the appellant did not contest these aspects. However, regarding the penalties imposed, the Tribunal noted that the appellant genuinely believed the services rendered were works contracts, supported by their payment of works contracts tax to the State Government. The Tribunal opined that had the appellant contested the issue on merits, they would have succeeded, citing a judgment of the Apex Court. Consequently, invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalties imposed on the appellant, modifying the impugned order accordingly.

In conclusion, the Tribunal disposed of the appeal by upholding the tax liability and interest while setting aside the penalties imposed on the appellant. The invocation of Section 80 of the Finance Act, 1994 was crucial in this decision, providing relief to the appellant based on their genuine belief regarding the nature of services rendered.