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2025 (2) TMI 261 - AT - Service TaxLevy of penalty when the entire amount of service tax has been paid much before issuance of SCN - appellant willing to pay the applicable interest - HELD THAT - The appellant is willing to pay interest on the service tax paid before issuance of the show-cause notice. It is the contention of the learned advocate for the appellant that even though during the relevant period they had not paid service tax on turnkey contracts since both service as well as materials had been supplied under the said contract treating the same as works contract. However since those contracts are not available with them being more than two decades old it would be difficult on their part to substantiate their claim. Therefore on instruction from the appellant the learned advocate submits that they are willing to discharge interest applicable on the service amount of Rs.29, 47, 547/- already paid and prays for invoking Section 80 of the Finance Act 1994. The entire amount of service tax confirmed has been paid by the appellant much before the issuance of show-cause notice. It is their contention that wherever services are rendered during the period 01.07.2003 to 27.03.2007 involving only Erection Installation and Commissioning appropriate Service Tax was paid and they had not discharged Service Tax on works contract. Fairly they submitted that these contracts could not be placed being not traceable. Hence it is only in the nature of works contract cannot be ascertained since all these contracts could not be placed on record due to lapse of time. In their reply to show-cause notice and in their Appeal Memorandum they have been claiming consistently that the service rendered by them wherever VAT is paid and service tax not paid when it is in the nature of works contract service. The applicable Service Tax has been already paid and the appellant agree to discharge the interest on the said amount. There are no reason not to invoke Section 80 of the Finance Act 1994 as far as imposition of penalty is concerned. Conclusion - i) The applicable Service Tax has been already paid and the appellant agree to discharge the interest on the said amount. ii) There are no reason not to invoke Section 80 of the Finance Act 1994 as far as imposition of penalty is concerned. Appeal disposed off.
The core legal issue in this judgment revolves around the imposition of penalties under the Finance Act, 1994, concerning the non-payment of service tax on services rendered under the category of Erection, Installation, and Commissioning Services during the period from 01.07.2003 to 27.03.2007. The appellants argue that they were not liable for service tax on contracts where materials were supplied along with services, treating these as works contracts. They have already paid the service tax amount before the issuance of the show-cause notice and are willing to pay the applicable interest.
The relevant legal framework includes the provisions of the Finance Act, 1994, particularly Section 80, which allows for the waiver of penalties in certain circumstances. The appellants contend that the contracts in question were works contracts, and thus, they were not liable for service tax on the entire contract value. However, they could not produce the contracts to substantiate their claim due to their age. The appellants rely on several precedents to support their argument against the imposition of penalties. The Court's interpretation centers around the fact that the appellants have paid the entire service tax amount before the issuance of the show-cause notice and have expressed willingness to pay the interest. The Court acknowledges the difficulty faced by the appellants in producing the contracts due to their age but notes their consistent claim that the services rendered were in the nature of works contracts. The Court finds that the appellants have demonstrated a bona fide belief in their tax obligations and have shown compliance by paying the service tax and agreeing to pay interest. Key evidence includes the appellants' payment of the service tax amount of Rs.29,47,547/- before the show-cause notice and their consistent claim that the services were works contracts. The appellants' inability to produce the contracts due to their age is also considered. The Court notes the appellants' reliance on legal precedents that support their argument against the imposition of penalties. The Court applies the law to the facts by considering the appellants' payment of service tax and willingness to pay interest as mitigating factors under Section 80 of the Finance Act, 1994. The Court finds that these factors justify the waiver of penalties. The Court also considers the appellants' argument that they were not liable for service tax on works contracts but notes the lack of documentary evidence to support this claim. The Court addresses competing arguments by acknowledging the Revenue's position that penalties should be imposed. However, the Court finds that the appellants' payment of service tax and willingness to pay interest demonstrate a bona fide belief in their tax obligations, warranting the waiver of penalties under Section 80. The significant holding in this judgment is the Court's decision to invoke Section 80 of the Finance Act, 1994, to waive the penalties imposed on the appellants. The Court concludes that the appellants' actions demonstrate a bona fide belief in their tax obligations and compliance with the law. The Court modifies the impugned order to confirm the service tax and interest but sets aside the imposition of penalties. The core principle established is that penalties under the Finance Act, 1994, can be waived if the taxpayer demonstrates a bona fide belief in their tax obligations and compliance with the law, as evidenced by the payment of service tax and willingness to pay interest. The final determination is that the penalties imposed on the appellants are set aside, and the appeal is disposed of accordingly.
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