2016 (12) TMI 846 - HC - Central Excise

Imposition of penalty - invocation of section 80 - cargo handling services - Held that - the Tribunal was justified in invoking the provisions of Section 80 of the Finance Act and setting aside the order imposing penalty. Admittedly, the contract between the respondent assessee and M/s SAIL was executed in the year 1999 and in this background, it cannot be said that the respondent assessee could not have been under a bona fide impression that since the contract was executed in the year 1999, he was not liable to pay the service tax as the liability to pay service tax was fastened for the first time by insertion of the relevant provision in the Finance Act in the year 2002. The Tribunal also believed the case of the respondent assessee that the assessee was under a bona fide impression that since he was rendering the services to the public sector undertakings, the question of taxability may not arise - invocation of section 80 justified - appeal dismissed - decided in favor of respondent-assessee.

Summary

Issues:
Challenge to setting aside penalty imposed by Commissioner of Central Excise and Customs by Customs, Excise and Service Tax Appellate Tribunal.

Analysis:
The case involved a dispute where the respondent assessee was providing Cargo Handling services and entered into a contract with M/s SAIL. The Commissioner of Income Tax directed the assessee to pay service tax, interest, and penalty for not discharging the service tax liability. The CESTAT upheld the order to pay service tax with interest but set aside the penalty. The appellant Commissioner challenged the setting aside of the penalty in this Central Excise Appeal.

The appellant argued that the Tribunal was unjustified in setting aside the penalty, invoking Section 80 of the Finance Act. It was contended that the assessee had paid service tax for works done for other public sector undertakings during the relevant period. However, the Tribunal's finding that the assessee was under a mistaken impression regarding the liability to pay service tax to M/s SAIL was deemed erroneous by the appellant.

Upon review, the High Court found that the Tribunal was justified in invoking Section 80 of the Finance Act to set aside the penalty. It was noted that the appellant did not present the argument that service tax was paid for services to other public sector undertakings before the Tribunal. As such, the Court declined to consider this argument during the appeal. The Court upheld the Tribunal's decision, stating that the assessee's belief regarding the service tax liability due to the contract's timing in 1999 was reasonable, as the relevant provision was inserted in the Finance Act in 2002.

The Court emphasized that the findings of the CESTAT were based on a proper assessment of the case and should not be lightly interfered with. As no substantial question of law arose, the appeal was dismissed with no order as to costs.