2014 (10) TMI 384 - AT - Service Tax

Small scale exemption - Non payment of tax - Maintenance and repair services - Held that - Revenue have recorded statement of appellant in March, 2008 prior to the issue of show-cause notice, in which it is stated that as per his understanding, he is not liable to pay Service Tax. Further, as per the record, no Service Tax was paid prior to this date. Further, it appears from the record prior to the issue of show-cause notice the appellant have paid suo motu Service Tax only after crossing the exemption limit. During the course of hearing, the Counsel for the appellant stated that for the financial year 2005-06 and 2007-08 the Service Tax has been paid after issue of show-cause notice in December, 2008 and January, 2009 which cannot be called payment suo motu and the same be treated under the protest or compulsion. Thus, in view of the facts and circumstances and in law, it is held that the appellant is not liable to pay Service Tax for the financial year 2005-06 and 2007-08. It is further held that there is no violation of provision of Act or Rules on the part of the appellant and thus the impugned order is set aside and appeal is allowed - Decided in favour of assessee.

Issues:
1. Tax liability for maintenance and repair services provided by a small service provider.
2. Exemption limits under Service Tax for different financial years.
3. Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Tax liability for maintenance and repair services provided by a small service provider.

The appellant, a small service provider, was engaged in providing maintenance and repair services and subsequently registered for providing construction services. The appellant entered into an agreement in 2005 to render maintenance services to a company. The turnover for the financial years was analyzed to determine tax liability. The appellant argued that for certain periods, the turnover was within exemption limits and Service Tax was paid suo motu after crossing the exemption limit for other periods. The Revenue contended that since the appellant opted to pay Service Tax, exemption for small-scale service providers did not apply. The Tribunal considered the appellant's payment history and held that the appellant was not liable to pay Service Tax for specific financial years, setting aside the demand and allowing a refund for those periods.

Issue 2: Exemption limits under Service Tax for different financial years.

The appellant's turnover for different financial years was scrutinized concerning the exemption limits under Service Tax. The appellant had paid Service Tax suo motu after exceeding the exemption limit for certain periods. The Counsel argued that for specific financial years, the turnover was below the exemption limit, thus no liability for Service Tax existed. The Revenue contended that since the appellant paid Service Tax voluntarily, exemption for small-scale service providers was not applicable. The Tribunal reviewed the payment history, statements, and circumstances, concluding that the appellant was not liable to pay Service Tax for particular financial years, thereby allowing a refund for those periods.

Issue 3: Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994.

A show-cause notice was issued proposing a demand for Service Tax along with penalties under various sections of the Finance Act, 1994. The Order-in-Original confirmed the demand, penalties, and interest. The Commissioner (Appeals) dropped the demand for a specific period but upheld it for subsequent periods, imposing penalties. The appellant appealed to the Tribunal challenging the penalties. The Tribunal analyzed the appellant's payment history, statements, and circumstances. It held that the appellant was not in violation of the Act or Rules, setting aside the penalties and allowing the appeal, entitling the appellant to a refund for the periods in question.

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