2019 (8) TMI 912 - AT - Service Tax

Construction of Residential Complex Services - tax liability was discharged, but, instead of depositing the said service tax at the time of raising of the invoices, the same was deposited subsequently on receipt of the consideration - HELD THAT - The appellant was required to pay the said service tax at the time of raising of invoices. Subsequently payment of tax would result in interest confirmation against them - Accordingly, we uphold the same and direct the Lower Authorities to quantify the interest amount. Penalty - HELD THAT - Inasmuch as for sale of the flats, there may not be first raising of the invoices prior to the actual sale and the appellant would be under a belief that he is required to deposit the service tax only on actual sale of the flats, we extend the benefit to the assessee and set aside the penalty imposed upon him under Section 77 and also under Section 78. Appeal disposed off.

Summary

Issues:
1. Time period for payment of service tax in construction of residential complex services.
2. Dispute regarding the deposit of service tax at the time of issuing invoices.
3. Imposition of interest and penalties under Sections 77 and 78 of the Finance Act.

Analysis:
1. The appellant was engaged in providing 'Construction of Residential Complex Services' and discharged tax liability upon receiving consideration from buyers. Revenue initiated proceedings, demanding payment of service tax at the time of invoicing, culminating in an order confirming a demand of ?93,783 along with interest and penalties under Sections 77 and 78 of the Finance Act.

2. The appellant argued that they paid the tax upon receipt of consideration, albeit not at the time of invoicing. The appellant's representative contended that the delay in depositing service tax did not warrant the demand confirmation. Acknowledging the time difference in tax payment, the appellant sought the annulment of penalties, citing industry practices of invoicing post realization of amounts. Reference was made to a Tribunal decision remanding the matter to verify the tax payment timing.

3. The Tribunal observed that the core issue was the timing of service tax deposit, with no dispute over eventual payment by the appellant. While upholding interest payment due to delayed tax deposit, penalties under Sections 77 and 78 were set aside. Recognizing industry norms where invoices are raised post-sale realization, the Tribunal extended leniency to the appellant, disposing of the appeal in their favor.

This judgment clarifies the obligation to pay service tax at the time of invoicing in construction services, balancing industry practices with legal requirements. The decision emphasizes the importance of timely tax compliance while considering practical challenges faced by taxpayers in specific sectors.