2016 (11) TMI 1108 - AT - Service Tax

Penalty - Construction of a jetty - bonafide belief - Service Tax liability with interest having been discharged - Held that - the appellant had declared receipt of payment and claimed the said payment as received for exempted services, there could be a bonafide belief that tax liability does not arise - No penalty - Decided in favor of the assessee.

Summary

Issues:
Service Tax liability on industrial construction services rendered, penalties under Section 77 & 78 of the Finance Act, 1994, bonafide belief regarding taxability, exemption for transport terminal services, applicability of penalties despite advance payment of tax.

Analysis:
The appeal challenged an Order-in-Original regarding Service Tax liability for industrial construction services provided to a company. The appellant initially did not discharge the Service Tax liability but later paid it along with interest. The adjudicating authority confirmed the demand and imposed penalties under Sections 77 & 78 of the Finance Act, 1994. The appellant argued that they believed the services were exempted and thus penalties should be set aside. The Departmental Representative cited precedents and contended that penalties should be upheld. The Tribunal considered both sides' submissions and upheld the Service Tax liability and interest while analyzing the penalty issue separately.

Regarding penalties, the Tribunal noted that the appellant declared the services as exempted in their returns, indicating a bonafide belief that tax liability did not arise due to the services being used for unloading cargo at an onshore terminal. The Tribunal found that the appellant's declaration of payments for exempted services supported their belief, distinguishing the case from previous judgments. They highlighted the difference in facts from other cases cited and emphasized the appellant's specific reporting of payments for exempted services as a basis for a bonafide belief in non-taxability. The Tribunal invoked Section 80 of the Finance Act, 1994, to set aside the penalties while upholding the Service Tax liability and interest, thereby disposing of the cross objection as well.

In conclusion, the Tribunal upheld the Service Tax liability and interest but set aside the penalties imposed on the appellant based on their bonafide belief regarding the taxability of the services provided. The decision highlighted the importance of specific reporting and declarations made by the appellant in determining a bonafide belief, ultimately invoking Section 80 of the Finance Act, 1994, to relieve the appellant of the penalties.