2018 (10) TMI 85 - AT - Service Tax

Penalty u/s 77 and 78 - payment of Service Tax on being pointed out - Construction of residential complex service - bonafide belief - invocation of section 80 - Held that - The appellant had no fraudulent intention to defraud the Government revenue. Rather, due to complexity of the issue regarding leviability of service tax on the disputed service, the appellant did not pay the service tax and subsequently paid such amount before adjudication of the matter - Since the appellant did not pay the service tax due to the reasonable belief that the same is not payable, the benefit of section 80 of the Act can be invoked in the circumstances of the case for waiver of penalties imposed on the appellant - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax demand confirmation for construction of residential complex service, imposition of penalties under sections 77 and 78 of the Finance Act, 1994.

Analysis:

Service Tax Demand Confirmation:
The appeal was against an order confirming a service tax demand of ?59,05,616 along with interest for construction of residential complex services provided by the appellant from 01.07.2010 to 31.03.2012. The Commissioner of Central Excise observed that the appellant admitted the service tax liability and had paid part of the amount before the issuance of the show cause notice. The impugned order sustained the service tax demand and interest based on specific findings and documents available. The appellant did not contest the liability to pay service tax on the taxable service provided, as reflected in the books of accounts and considered in the show cause notice.

Imposition of Penalties:
The adjudicating authority discussed the statutory provisions, CBEC clarification, and the judgment of the Bombay High Court regarding the levy of service tax on the disputed service. The authority concluded that the appellant was liable to pay the disputed service tax amount. However, it was noted that the appellant did not have fraudulent intent to defraud the government revenue. Due to the complexity of the issue regarding service tax liability, the appellant did not pay the tax initially but paid before adjudication. Considering the circumstances, the benefit of Section 80 of the Act was invoked to waive the penalties imposed under sections 77 and 78. The penalties were set aside, but the service tax demand along with interest confirmed in the impugned order was upheld.

Conclusion:
The Tribunal disposed of the appeal by setting aside the penalties under sections 77 and 78 while maintaining the service tax demand and interest. The appellant's reasonable belief regarding the non-payment of service tax initially led to the invocation of Section 80 for penalty waiver. The judgment emphasized the importance of compliance with service tax liabilities and the consequences of non-payment, even if done inadvertently.