2023 (9) TMI 521 - AT - Service Tax

Invocation of extended period of limitation - levy of penalty u/s 78 of FA - Suppression of facts or not - Construction Service (Painting) declared correctly or not - correct availment of benefit of N/N. 1/2006-ST or not - HELD THAT - The appellant has regularly been filing ST-3 returns - the appellant have regularly being declaring their service activity correctly in the return. They have also been claiming the benefit of Notification No. 1/2006-ST dated 01.03.2006. The amount of taxable value for the service tax has also been declared by them correctly after availing abatement as per Notification No. 1/2006-ST. From the scanned copies of ST-3 returns, it can be seen that the appellant have correctly classified the taxable service mentioning Construction Service (Painting) . They have also declared abatement under Notification No. 1/2006-ST. - there is no element of the misrepresentation or suppression of facts with an intent to evade payment of service tax and therefore the demand of service tax under the extended time proviso under Section 73(1) of Finance Act, 1994, set aside. Penalty u/s 78 of FA - HELD THAT - Since the elements of fraud, mis-statement or suppression of facts etc. with an intent to evade service tax are not present in the matter therefore, the penalty under Section 78 of the Finance Act, 1994 is not imposable in this case. Accordingly, the penalty imposed in the impugned order-in-original under Section 78 of the Finance Act, 1994 against the appellant is set-aside. The demand for the extended time proviso under Section 73 of the Finance Act, 1994 set aside - The demand for the normal period is confirmed. The appeal is partly allowed.

Summary

Issues:
The issues involved in the judgment are whether the demand for service tax under the extended time period of five years is legally sustainable and whether penalty under Section 78 of the Finance Act, 1994 is imposable.

Issue 1: Demand for Service Tax under Extended Time Period

The appellant, engaged in construction services including finishing and painting, had been filing ST-3 returns and paying service tax after availing abatement as per Notification No. 01/2006-ST. The department issued a show cause notice demanding service tax of Rs. 55,08,924 under Section 73(1) of the Finance Act, 1994 for an extended time period, alleging that the appellant had suppressed facts regarding providing painting services. The appellant argued that they had correctly declared their services in the returns, including "Construction Service (Painting)" and had not suppressed any facts. The Tribunal found that the appellant had consistently declared their service activity correctly in the returns, claiming abatement as per the notification. The Adjudicating Authority's finding of suppression of facts was deemed factually incorrect based on the ST-3 returns submitted by the appellant, which clearly indicated the nature of services provided. Consequently, the demand for service tax under the extended time proviso was set aside as there was no intent to evade payment of service tax.

Issue 2: Imposition of Penalty under Section 78

The Tribunal further considered whether penalty under Section 78 of the Finance Act, 1994 was applicable in this case. It was noted that there was no element of fraud, misstatement, or suppression of facts with an intent to evade service tax by the appellant. As a result, the penalty imposed in the impugned order-in-original under Section 78 was set aside. The Tribunal concluded that since there was no evidence of fraud or intent to evade service tax, the penalty under Section 78 was not imposable. The demand for the normal period was confirmed, and the appeal was partly allowed by setting aside the demand for the extended time proviso under Section 73 of the Finance Act, 1994.

This judgment by the Appellate Tribunal CESTAT AHMEDABAD addressed the issues of demand for service tax under the extended time period and imposition of penalty under Section 78 of the Finance Act, 1994. The Tribunal found in favor of the appellant, ruling that there was no suppression of facts and no intent to evade payment of service tax, leading to the setting aside of the demand for service tax under the extended time proviso. Additionally, the penalty under Section 78 was deemed not applicable due to the absence of fraud or misrepresentation. The decision was pronounced in the open court on 11.09.2023.