2016 (12) TMI 998 - AT - Service Tax

Imposition of penalty u/s 78 of the Finance Act, 1994 - no intent to evade tax - invocation of section 80 - bonafide beleif - Held that - it is seen that the appellant entertained the belief that they were not liable to tax because the objectives were in relation to public service. Further, upon proceedings being initiated against them, the full amount of tax as well as interest were paid. There is also no reason to disbelieve the contention of the appellant that there was no intent to evade tax and this has been sufficiently established by voluntary payment of the tax and interest - I find that this is a fit case for invoking section 80 of the finance Act, 1994. Accordingly, penalty imposed under section 78 of the finance Act, 1994 is set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
Penalties for failure to discharge tax obligation as a provider of 'commercial or industrial construction service' for a specific period.

Analysis:
The case involved penalties related to the failure to fulfill tax obligations as a provider of 'commercial or industrial construction service' for a defined period. The tax liability was determined to be ?17,56,977. The matter had been previously heard by the Tribunal and decided, with the Revenue appealing to the High Court of Bombay on the grounds of penalty discretion. An amount of ?10 lakhs had been paid earlier, and additional payments were made during subsequent appeals. The appellant argued that there was no evidence of suppression or misdeclaration, emphasizing their exemption belief due to engaging in exempted activities for the government. The appellant also highlighted that they promptly paid the outstanding tax and interest upon initiation of proceedings. The appellant referenced relevant Tribunal decisions to support their case. The Authorized Representative contended that the appellant, engaged in commercial activities, could not claim ignorance of tax laws. Upon reviewing the case records, it was found that the appellant genuinely believed they were not liable for tax due to the nature of their work. Given the circumstances, the penalty under section 78 of the Finance Act, 1994, was set aside, and the appeal was allowed under section 80 of the same Act.