2015 (3) TMI 480 - AT - Service Tax

Erection, Commissioning or Installation Services - Penalty u/s 76, 77 & 78 - Lack of knowledge - Held that - In view of the categorical stipulations in the respective Work Orders, there is no room for the Respondent to plead that they were not aware of the applicability of service tax to the services rendered by them. In this scenario, the setting aside of the penalty by the ld. Commissioner (Appeals) without recording reasons and analyzing the facts, in my opinion, is unsustainable. Consequently, the impugned Order is set aside. Penalties under Sections 77 and 78 would suffice the present purpose; and therefore, the penalty imposed under Section 76 of the Finance Act, 1994, was not warranted. Consequently, the penalties imposed under Sections 77 and 78, are upheld and the penalty imposed under Section 76, is set aside. - case is remanded to the Adjudicating Authority to afford an opportunity to the Respondent-Assessee to pay 25% of the penalty imposed under Section 78 of the Finance Act, 1994, on fulfillment of the conditions laid down therein - Following decision of Commissioner vs. Krishnaram Dyeing & Finishing Works 2013 (8) TMI 539 - GUJARAT HIGH COURT - Decided partly in favour of Revenue..

Summary

Issues:
- Appeal against dropping of penalty by Commissioner (Appeals)
- Applicability of service tax on rendered services
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994

Analysis:
1. Appeal against dropping of penalty by Commissioner (Appeals):
The appeal was filed by the Revenue challenging the dropping of penalty by the Commissioner (Appeals) in response to a Show Cause Notice issued to the Respondent for failure to discharge service tax liability. The Adjudicating Authority had confirmed the demand, imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994, and the Respondent had appealed against this decision.

2. Applicability of service tax on rendered services:
The Respondent had rendered taxable services to M/s. BHEL but failed to discharge the service tax liability initially. The Adjudicating Authority observed that the Respondent had not paid the service tax despite specific mention of the liability in the Work Orders. The Respondent claimed ignorance of the law, but the Authority found this unacceptable due to the explicit mention of service tax liability in the contracts.

3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The Adjudicating Authority imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994, based on the failure of the Respondent to pay service tax despite contractual obligations. The Commissioner (Appeals) dropped the penalty without detailed reasoning, leading to the Revenue's appeal. The Tribunal set aside the Commissioner's decision, upholding penalties under Sections 77 and 78 while setting aside the penalty under Section 76. The case was remanded to allow the Respondent to pay 25% of the penalty under Section 78 as per established conditions.

In conclusion, the Tribunal partially allowed the Revenue's appeal, emphasizing the importance of adhering to service tax obligations as specified in contracts and upholding penalties under relevant sections of the Finance Act, 1994. The decision highlighted the need for awareness and compliance with tax laws, ultimately balancing penalties with the opportunity for the Respondent to fulfill their obligations under the law.