2019 (7) TMI 722 - AT - Service Tax

Waiver of penalties imposed - Short payment of service tax - mis-match between the ledger and the bank statement of the respondent - the department was of the view that the service tax payable was ₹ 41,51,6210/- whereas the respondents have discharged service tax amounting to ₹ 29,77,682/- and interest of ₹ 3,67,932/- - demand of service tax alongwith interest and penalties - invocation of section 80 - wilful suppression of facts or not - intent to evade. HELD THAT - It is true that the issue of service tax on builders was challenged before the Hon ble High Court during the relevant period. It is also not disputed that as soon as the writ petition was rejected by the Hon ble High Court, the respondent instantly took the service tax registration and paid the service tax with interest as per their calculation much before the issuance of show cause notice, although the same was short by few thousand rupees. But that itself shows that there is no mala fide intention to evade the Service Tax on the part of the respondent. There is no suppression of fact because the issue involved is of interpretation of law as the confusion was prevailing amongst the builders about the constitutional validity of the levy of service tax on Builders and Developers. Therefore benefit of doubt that existed in the mind of the assessee is to be given to the respondent. It constitutes a reasonable cause for not paying the service tax in view of Section 80 ibid which was in operation during the period in dispute. Therefore, the learned Commissioner was justified in interfering with the levy of penalty by setting aside the same. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Appellant's challenge to penalties under sections 77 and 78 of the Finance Act, 1994.
2. Justification for waiving penalties under section 80 of the Finance Act, 1994.

Analysis:

Issue 1: Appellant's challenge to penalties under sections 77 and 78
The case involved the appellant challenging penalties imposed under sections 77 and 78 of the Finance Act, 1994. The respondent, engaged in construction activities, failed to pay service tax on advances received from flat buyers during specific financial years. The department issued a show cause notice demanding service tax, interest, and penalties. The Additional Commissioner confirmed a portion of the demand, dropping another, and ordering the appropriation of the amount already deposited. On appeal, the Commissioner upheld the service tax liability and interest but waived the penalties under sections 77 and 78 under section 80 of the Act. The appellant argued that their delayed compliance was due to ongoing litigation challenging the levy of service tax on builders, which was resolved by the High Court's final order. The Commissioner found the appellant's actions reasonable and justified in setting aside the penalties under sections 77 and 78.

Issue 2: Justification for waiving penalties under section 80
The appellant's justification for waiving the penalties under section 80 centered around the confusion and legal challenges regarding the levy of service tax on builders during the relevant period. The High Court's interim order and final decision provided a backdrop for the appellant's delayed compliance with service tax obligations. The Commissioner acknowledged the lack of mala fide intent on the appellant's part, considering the legal uncertainties and the appellant's prompt action post the High Court's decision. The Commissioner deemed the confusion surrounding the legal provisions a reasonable cause for the delayed payment of service tax, warranting the waiver of penalties under section 80. The appellate authority upheld the Commissioner's decision, emphasizing the absence of infirmity in the order passed.

In conclusion, the appellate tribunal dismissed the appeal filed by the revenue, affirming the Commissioner's decision to waive penalties under sections 77 and 78 under section 80 of the Finance Act, 1994. The judgment highlighted the importance of legal context and reasonable cause in determining the applicability of penalties in tax matters.