2014 (1) TMI 568 - AT - Service Tax

Application of Section 80 - Imposition of penalty - Activity of Over Burden Removal, Site Formation and clearance, Excavation and Earth Moving and Demolition Services - Period of service - Held that - As per the contract which is for Over Burden Removal and there is no activity of mining under the contract. Therefore, we find no infirmity in the impugned order the demand along with interest is confirmed. In respect of penalties imposed, we find that Section 80 of the Finance Act, provides that notwithstanding anything contained in the provisions of Section 76, or Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in said provisions if the assessee proves that there was reasonable cause for the said failure. Limited company is found by Ex-servicemen, disabled Ex-servicemen and war widows and allowed to work into area specified by the government. During the period in dispute the appellant were also corresponding with the Western Coalfields Limited for payment of service tax. In these circumstances, we find that in view of the provisions Section 80 of the Finance Act, impositions of penalties are not sustainable - Decided in favour of assessee.

Summary

Issues:
1. Whether the demand for service tax, interest, and penalties imposed on the appellant are sustainable.
2. Whether the activities undertaken by the appellant fall under the scope of mining service for service tax purposes.
3. Whether the appellant, being a company consisting of Ex-servicemen, disabled Ex-servicemen, and war widows, is exempt from service tax liability.
4. Whether the penalties imposed on the appellant are justified.

Analysis:
1. The appellant contested the demand, interest, and penalties imposed based on activities related to Over Burden Removal, Site Formation, clearance, Excavation, Earth Moving, and Demolition Services. The appellant argued that the demands were prior to the introduction of service tax on mining activity and therefore not sustainable. The Tribunal examined the contracts and found no mining activity involved, upholding the demand with interest. However, penalties were set aside under Section 80 of the Finance Act if reasonable cause for failure is proven.

2. The appellant claimed that their services were related to mining of minerals, falling under the scope of service tax effective from a later date than the period in question. The Tribunal reviewed the contracts and determined that no mining activity was evident, leading to the confirmation of the demand for services other than mining. The appellant's argument regarding the applicability of service tax on mining services was not accepted.

3. The appellant, being a company of Ex-servicemen, disabled Ex-servicemen, and war widows, argued that they were exempt from service tax liability due to government rehabilitation initiatives. The Tribunal acknowledged the composition of the company but found no explicit exemption from service tax based on the appellant's characteristics. The demand was upheld, but penalties were waived under Section 80 of the Finance Act due to the circumstances.

4. Regarding penalties imposed on the appellant, the Tribunal considered Section 80 of the Finance Act, which allows for penalty waiver if reasonable cause for failure is demonstrated. The Tribunal noted the appellant's correspondence with the relevant authorities and their composition of Ex-servicemen, disabled Ex-servicemen, and war widows. Based on these factors and the provisions of Section 80, the penalties were deemed unsustainable and set aside, while the rest of the orders were upheld.