2019 (5) TMI 1100 - AT - Service Tax

Imposition of penalty - service tax along with interest much before the issuance of SCN - Works Contract Service - period 11.05.2007 to 24.04.2009 - HELD THAT - The appellant has not discharged the service tax under Works Contract Services for which a show cause notice has been issued. The appellant has pleaded that they failed to discharge the service tax for the reason that they were not aware that they are liable to pay service tax mainly because the services were rendered to public sector undertaking and also that they were under the bonafide belief that service tax is not required to be paid. The said contention cannot be accepted. The appellant has paid the entire amount of service tax along with interest much before the issuance of SCN - as per subsection (3) of Section 73 of Finance Act, 1994, the penalties imposed cannot sustain. Demand of service tax with interest upheld - penalty set aside - appeal allowed in part.

Summary

Issues:
- Demand of service tax under Works Contract Service
- Imposition of penalties under sections 77 & 78 of the Finance Act, 1994

Analysis:
1. The appellant was issued a show cause notice for service tax under Works Contract Service for a specific period. The original authority confirmed the demand of a certain amount along with penalties. The appellant appealed to the Commissioner (Appeals) who upheld the decision, leading to the current appeal before the tribunal.

2. During the hearing, the appellant's counsel requested consideration of their submissions. The Department's representative supported the findings in the impugned order.

3. Upon reviewing the submissions and records, it was noted that the appellant did not discharge the service tax under Works Contract Services as per the show cause notice. The appellant argued lack of awareness and a genuine belief that service tax was not applicable, particularly when dealing with public sector undertakings. Despite this, the appellant had paid the entire service tax along with interest before the show cause notice was issued.

4. Considering the appellant's early payment of service tax and interest, the tribunal referred to subsection (3) of Section 73 of the Finance Act, 1994. As a result, the penalties imposed under sections 77 & 78 were set aside, while the demand for service tax and interest remained unchanged.

5. The tribunal partially allowed the appeal, providing consequential reliefs as applicable. The decision was dictated and pronounced in open court by the presiding members.