2019 (6) TMI 846 - AT - Service Tax

Effect of amendment - explanation added to section 65(105)(zzq) (zzh) of the Finance Act levying Service Tax before and after construction made by the builder - HELD THAT - Appellant firm was visited by the Respondent s department for scrutinisation of the record on 9-5-2012 and it had not filed any return in-between. Therefore, upon filing of return, payment of Service Tax and late filing fee were supposed to be paid, which Appellant did not prefer to pay and in that respect Rule 7 of the Service Tax 1994 read with u/s 70 of the Finance Act was invoked by the Appellant Department in 2 parts i.e. ₹ 2000/-upto dt. 8-4-2011 and ₹ 20,000/- for the remaining period post amendment dt. 8-4-2011 introduced to section 70 of the Finance Act. No irregularity or ir-rationality can be noticed in respect of the order of the adjudicating authority and therefore Commissioner (Appeal) s order equating fine for late filing of returns with penalty for non-payment of duty, prior to issue of show cause notice is not in conformity with the law and the same is required to be modified. Waiver of penalties - section 77, 78 of the Finance Act read with 7C of the Service Tax Rules - HELD THAT - It is noticed from the OIO that Respondent had intimated the department on 24-9-2012 that all its tax liability have been discharged, which appears to have been done within a period of 6 months, effective date of implementation of section-80 being 28-05-2012. Therefore, no irregularity is found in the order of the Commissioner (Appeals) in waiving of penalty u/s. 76, 77 78 of the Finance Act. No irregularity or illegality that can be noticed from the order of the Commissioner (Appeals) in invoking section 80 in the case of the Appellant - the order of the Commissioner (Appeals) passed in order-in-Appeal in respect of waiving off late fee imposed under Rule 7C of the Service Tax rule read with section 70 of Finance Act is set aside - the order in waiving off penalty imposed u/s 77 78 of the Finance Act as per section 80 of the Finance Act is confirmed - Appeal allowed in part.

Summary

Issues:
Waiving off penalties imposed under sections 77, 78 of the Finance Act read with 7C of the Service Tax Rule.

Analysis:
1. The case involved a proprietary firm providing construction services that received advances for booking flats. The firm failed to pay the due Service Tax, leading to penalties imposed by the adjudicating authority.
2. The Appellant argued that the dropping of penalties by the Commissioner (Appeals) under section 80 of the Finance Act was not sustainable due to the omission of section 80 in 2015. The Appellant also failed to declare service tax dues in ST-3 Returns.
3. The Respondent contended that amendments to the Finance Act in 2010 led to confusion regarding the taxability of construction services. The Commissioner (Appeals) waived penalties due to pending legal challenges and payment of tax before the show cause notice.
4. The Tribunal found that the Appellant was not a member of the Maharashtra Chamber of Housing Industry and was not registered for Service Tax before 2012. The Appellant failed to pay Service Tax and late filing fees as required.
5. Regarding the waiver of penalties, the Tribunal noted that the Respondent had reasonable cause for non-payment due to legal challenges. The Commissioner (Appeals) correctly invoked section 80 of the Finance Act to waive penalties.
6. The Tribunal upheld the Commissioner (Appeals) decision to waive penalties under sections 77 and 78 of the Finance Act, as the violations occurred when section 80 was in force.

Conclusion:
The appeal was allowed in part, setting aside the late fee but confirming the waiver of penalties under sections 77 and 78 of the Finance Act as per section 80 of the Finance Act.