2015 (8) TMI 448 - AT - Service Tax

Demand of service tax - Penalty u/s 76, 77 & 78 - Real estate service or service of construction of residential complexes - Held that - While the Revenues contention that the respondent have not been able to show that the amount for which the said service tax demand was dropped by Commissioner (Appeals) related to construction of residential complex, the fact remains that the Revenue has not been able to show that the said amount pertained to provision of Real Estate Agent service. - Revenues appeal with regard to service tax demand of ₹ 92,998/- is not sustainable. As regards, setting aside of penalty under Sections 76 and 77 because the penalty under Section 78 was imposed, it is settled law that during the relevant period the penalty under Section 76 and 78 were not mutually exclusive. Primary adjudicating authority had not given the option of reduced mandatory penalty to the respondent and therefore as per the ratio of Gujarat High Court judgement in the case of Ratnamani Metals & Tubes Ltd. Vs. CCE 2013 (12) TMI 1397 - GUJARAT HIGH COURT . the Commissioner (Appeals) was justified in granting that option but the Commissioner (Appeals) was required to put a condition that the said reduced penalty will have to be deposited within 30 days of the receipt of the order in appeal and by not putting that condition the Commissioner (Appeals) has certainly gone beyond the scope under Section 78 and therefore the reduction of mandatory penalty to 25% of demand without the condition of its deposit within 30 days is not sustainable. However as the option to pay reduced penalty in effect, has not been properly granted to the respondents following the ration of Gujarat High Court judgement in the case of Ratnamani Metals & Tubes (supra) it is to be granted by CESTAT. - Decided partly in favour of Revenue.

Summary

Issues:
1. Service tax demand of Rs. 92,998 under Real Estate Agent Service.
2. Imposition of penalty under Sections 76, 77, and 78.
3. Reduction of penalty under Section 78 to 25% without proper conditions.

Analysis:
1. The appeal concerns a service tax demand of Rs. 92,998 under Real Estate Agent Service for the period 2001-2005. The Revenue contested the Commissioner's decision to set aside this demand, arguing that the respondent failed to prove the amount related to Real Estate Agent Service. However, the Revenue couldn't establish that the amount was linked to the said service, shifting the onus to prove onto them. Consequently, the Revenue's appeal on this service tax demand was deemed unsustainable.

2. Regarding the imposition of penalties, the Tribunal clarified that penalties under Sections 76 and 78 were not mutually exclusive during the relevant period. While penalty under Section 78 was upheld, the Tribunal noted that penalty under Section 76 need not be imposed once penalty under Section 78 is levied. However, a penalty of Rs. 1000 under Section 77 remains imposable even with penalty under Section 78. The Commissioner's reduction of the penalty under Section 78 to 25% was deemed justifiable, but the absence of a condition for timely deposit rendered it unsustainable. Following precedents, the Tribunal upheld the penalty under Section 77 and restored the penalties under Section 78, with the option for reduced penalty of 25% if paid within 30 days.

3. The Tribunal's order concluded by dismissing the Revenue's appeal on the Rs. 92,988 demand, upholding penalties under Sections 77 and 78, and providing the option for reduced penalty under Section 78 if paid within the specified timeframe. The Tribunal emphasized the need for proper conditions when granting such options, as per legal precedents, ensuring a fair and lawful application of penalties in the case.