2009 (10) TMI 228 - AT - Service Tax

Erection, commissioning or installation services- Notification No. 19/2003-ST, dated 21.8.2003- Appellant is listed as service provider under the category of Erection, Commissioning or Installation Services . During the period from 10-9-2004 to 31-3-2007, appellants had provided services to their client and claimed abatement of 67 per cent under the Notification No. 19/2003-ST, dated 21-8-2003, as amended. . After issue of show-cause notice, adjudication and appellate proceedings, service tax demand with interest as applicable has been confirmed. Held that- Therefore, the only aspect to be examined is whether suppression of facts/mis-declaration should have been invoked or not in this case and penalty under section 78 is imposable. In view of the above interpretation given by me to the Notification which would mean that appellant would interpret the notification differently, penalty under section 78 of the Finance Act, 1994 cannot be upheld and is accordingly set aside. Penalty under section 77 has been imposed for late filing return which has to be upheld in view of the fact that return has been filed late. Both the appeals are decided in terms of the above observations.

Summary

Issues involved:
1. Applicability of Notification No. 19/2003-ST for abatement of service tax.
2. Liability of the assessee for penalty under various sections of the Finance Act, 1994.

Analysis:
1. The case involved the appellant, a service provider under "Erection, Commissioning or Installation Services," claiming abatement of 67% under Notification No. 19/2003-ST. The dispute arose as the appellants had purchased items like welding electrodes and welding gas from the market but had not sold these to clients or charged sales tax. The Tribunal analyzed the Notification, emphasizing that the gross amount charged should include the value of materials sold by the service provider during service provision. The Tribunal concluded that the interpretation requiring the sale of goods to avail exemption was incorrect. As the appellants believed they were eligible for the Notification and paid service tax in good faith, the penalty under section 78 of the Finance Act, 1994 was set aside.

2. The only issue left for determination was the liability for penalty under different sections of the Finance Act, 1994. The Commissioner (Appeals) had observed that there was no dispute regarding the liability to pay service tax and interest. The Tribunal noted that the penalty under section 76 was set aside by the Commissioner (Appeals) for failure to pay service tax on time. However, penalty under section 77 for late filing of returns was upheld as the return was indeed filed late. The Tribunal clarified that where service tax and interest are paid before the show-cause notice, no further action is warranted as per section 73 of the Finance Act, 1994. Consequently, the department's appeal against the penalty under section 76 failed, and the penalty under section 78 was set aside based on the interpretation of the Notification. Both appeals were decided in accordance with the above observations.