2016 (10) TMI 618 - AT - Service Tax

Imposition of penalty u/s 77 & 78 of the Finance Act, 1994 - construction of complex - benefit of doubt and bonafide belief- applicability of section 80 of the act - Held that - the issue of taxability of construction of complex was under doubt right from beginning and various circulars were issued to clarify the position on taxability of the said services. On the taxability of the services, the bonafide belief of the appellant in non payment of service tax in time, is established. It is not disputed that the appellant have recorded the entire transaction of their services in their books of accounts. The appellant have shown the reasonable cause for waiver of penalties invoking under Section 80 of the Finance Act - penalty waived - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalties imposed under Section 77 & 78 of the Finance Act, 1994 for non-payment of service tax on construction of complex services.

Analysis:
The appellant challenged penalties under Section 77 & 78 imposed by the Commissioner for non-payment of service tax on construction services. The appellant applied for registration on 5.1.2012 and paid service tax of Rs. 26,72,756/- and interest of Rs. 4,53,658/- for the period July 2010 to June 2012 before the show cause notice was issued on 18.12.2012. The Commissioner upheld the penalties, leading to this appeal.

The appellant argued that the levy of service tax on construction of complex services was disputed due to various circulars and legal challenges, citing judgments like Magus Construction Pvt. Ltd. and Maharashtra Chamber of Housing Industry. They claimed a bona fide belief in non-payment due to legal uncertainties, supported by cases like Neev Sai Developers and C.C.E. & S.T., LTU, Bangalore. The appellant also relied on precedents like Hindustan Steel Ltd. to argue against malafide intention for penalty imposition.

The Revenue contended that the scope of taxable service was clarified on 1.7.2010, removing doubts on taxability. They argued that the appellant should have paid after this date, justifying the penalties. However, the Tribunal noted ongoing legal challenges and uncertainties surrounding the taxability of construction services, including stays and appeals in higher courts.

The Tribunal found merit in the appellant's arguments, considering the long-standing doubts and legal disputes surrounding the taxability of construction services. They observed the appellant's proactive steps in registering and paying taxes before the show cause notice. Citing Section 80 of the Finance Act and consistent Tribunal decisions, the penalties under Section 77 & 78 were waived, while upholding the service tax and interest payments made by the appellant.

In conclusion, the Tribunal set aside the Commissioner's order and allowed the appeal, emphasizing the reasonable cause shown by the appellant for penalty waiver due to legal uncertainties and bona fide belief in non-payment of service tax. The judgment was pronounced on 11/03/2016.