2015 (11) TMI 469 - AT - Service Tax

Waiver of penalties imposed under Section 76, 77 and 78 - Site formation & clearances, excavation and earth moving and demolition - Bonafide belief that service covered under supply of tangible goods service - Held that - From the work order and description of the work, it shows that work order was for number of tippers and charges for supply of number of tippers. The charges also fixed for each tipper. From these details I agree that anybody can have belief that services falls under head of supply of tangible goods . Therefore the appellant s submission that they entertained bonafide belief regarding the classification of the services, found reasonable. Moreover the appellant, though, in my prima facie view, the issue on merit also contentious, without contesting the demand they discharged entire service tax liability alongwith interest. They only sought waiver of penalties in this appeal. - facts and nature of service provided by the appellant, I agree with the appellant that entertainment of bonafide belief by the them is proper and they have made out a case for waiver of penalties by invoking Section 80. I therefore waive penalties imposed under Section 76, 77 and 78. Since appellant have not contested the service tax demand and interest confirmed and paid by them, the same is maintained - Decided in favour of assessee.

Issues:
1. Classification of services under taxable category.
2. Liability for service tax and penalties.
3. Bonafide belief of the appellant regarding the nature of services provided.

Classification of services under taxable category:
The case involved M/s. Jain Enterprises providing excavation work to M/s. Murli Industries Limited, falling under the taxable category of "Site formation & clearances, excavation and earth moving and demolition." The Revenue observed that the appellant did not register with the Department during the relevant period and did not pay service tax on the taxable services provided. The Revenue issued a show cause notice leading to a demand for service tax, interest, and penalties. The appellant argued that they believed their services fell under "supply of tangible goods" and hence were not taxable. The appellant referred to the purchase order which detailed the work allotted, indicating charges for the supply of tippers. The Tribunal found the appellant's belief reasonable based on the work order details, leading to a waiver of penalties under Section 80 while maintaining the service tax demand and interest paid by the appellant.

Liability for service tax and penalties:
The Revenue contended that the services provided by the appellant were not of supply of tangible goods but related to site clearances and loading and unloading, falling under taxable services. The Revenue highlighted that the client confirmed to the department that the work involved was classifiable under taxable services. The Revenue argued that the appellant knowingly did not register or pay service tax, and penalties were correctly imposed. The Tribunal considered the Revenue's submissions and the grounds of appeal. It noted that the appellant did not contest the service tax demand and interest but sought waiver of penalties based on a bonafide belief regarding the nature of services provided. The Tribunal agreed with the appellant's bonafide belief and waived the penalties under Section 76, 77, and 78, while upholding the service tax demand and interest paid by the appellant.

Bonafide belief of the appellant regarding the nature of services provided:
The appellant claimed they had a bonafide belief that their services constituted "supply of tangible goods" and were not taxable. The Tribunal examined the purchase order details and found the appellant's belief reasonable based on the work allotted and charges specified for the supply of tippers. Despite the contentious nature of the issue on merit, the Tribunal acknowledged the appellant's bonafide belief and their payment of the entire service tax liability along with interest. Consequently, the Tribunal granted a waiver of penalties under Section 80, considering the facts and nature of services provided by the appellant.

This detailed analysis of the judgment highlights the issues of classification of services, liability for service tax and penalties, and the appellant's bonafide belief, leading to the Tribunal's decision to waive penalties while maintaining the service tax demand and interest paid by the appellant.

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