2018 (5) TMI 550 - AT - Service Tax

Erection, Commissioning and Installation - demand of service tax with interest and penalty - Held that - the demand for the year 2004 08 totaling ₹ 57,718/- is not sustainable, in view of the specific exemption with respect to service provided to Railways under Section 65 (105) (25b) of the Act, wherein the work done with Railways is not includable in taxable service. Appellant had paid the admitted taxes and nothing more was found payable in the Order-in-Original - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of service tax for the Financial Year 2006-07
- Imposition of penalties under Sections 76, 77, and 78

Analysis:
- The appellant, a service provider in the category of Erection, Commissioning, and Installation, contested the demand of service tax amounting to ?16,767 for the Financial Year 2006-07, along with the imposition of penalties under Sections 76, 77, and 78. The appellant argued that their services provided to Railways were exempted under Section 65 (105) (25b) relating to 'commercial or industrial construction service', which specifically excluded taxable services provided to Railways, Roads, Airports, etc. The appellant claimed that they mistakenly believed their services to others were also exempt, leading to non-payment of tax. The show cause notice alleged non-payment of service tax for work with M/s Reliance Communication Limited in 2004-05 and demanded tax for work with railway authority in 2006-07 and 2007-08. The appellant had paid taxes for some services but disputed the tax on work with Railways.

- The appellant contended that the only dispute was regarding the levy of service tax on work done with Railways and the penalties under Sections 76 and 77. After hearing arguments from both sides, the tribunal found that the demand totaling ?57,718 for 2004-08 was not sustainable due to the specific exemption for services provided to Railways under Section 65 (105) (25b). The tribunal noted that the appellant had paid admitted taxes and no further amount was found payable. It was acknowledged that proper records were maintained by the appellant, and the show cause notice was based on their financial documents. Consequently, the tribunal allowed the appeal, setting aside the order confirming the balance demand of tax and penalties under Sections 76 and 77 of the Finance Act. The appellant was granted consequential benefits as per the law.

This judgment highlights the importance of understanding tax exemptions and maintaining accurate financial records to support claims during tax disputes. It also emphasizes the significance of specific statutory provisions in determining tax liabilities, ultimately leading to a favorable outcome for the appellant based on the exemption provided for services rendered to Railways.