2018 (10) TMI 760 - AT - Service Tax

Benefit of reduced penalty - Works Contract Service - appropriate service tax not paid till investigation - Held that - Admittedly the appellant had failed to discharge service tax nor filed any intimation with the department about rendering of such services. However, the assessee-Appellant is entitled to discharge 25% of the quantum of penalty that in accordance with Section 78 of the Finance Act, 1994, subject to fulfillment of conditions laid down there under. The Ld. Commissioner(Appeals) has remanded the matter to re-compute the liability subject to verification of the claim of the assessee-appellant that in calculating the duty on the gross taxable value, erroneously certain amount received as hand loans has been included. Revenue has not produced any contrary evidence to be rebut the said claim - Revenue s appeal being devoid of merit is set aside.

Summary

Issues: Appeal against order-in-appeal regarding service tax liability, penalty under Section 78 of the Finance Act, 1994, and re-computation of demand.

Analysis:
1. Service Tax Liability: The appellant, engaged in works contract services, failed to pay appropriate service tax during the period 2008-09. The department issued a show cause notice for recovery of the service tax amounting to ?29,64,235. The adjudicating authority confirmed a demand of ?9,04,040 with interest and penalty under Section 78 of the Finance Act, 1994. The Ld. Commissioner (Appeals) observed that certain amount received as hand loan was wrongly included in the gross taxable value. The matter was remanded for verification, leading to a re-computation of the tax liability.

2. Penalty under Section 78: The Revenue contended that the penalty under Section 78 should be set aside, as they had already deposited a significant portion of the confirmed service tax demand and paid interest. However, the Revenue reiterated that the non-payment of service tax was only discovered after a visit by preventive officers, justifying the penalty upheld in the impugned order.

3. Re-computation of Demand: The Ld. Commissioner (Appeals) remanded the matter to re-compute the liability after considering the appellant's claim that certain hand loan amounts were erroneously included in the duty calculation. The Revenue failed to produce evidence to rebut this claim. Consequently, the Revenue's appeal was dismissed, and the appellant's appeal was partly allowed, with the appellant being entitled to discharge 25% of the penalty amount as per Section 78 of the Finance Act, 1994, subject to conditions.

In conclusion, the judgment addressed the issues of service tax liability, penalty under Section 78, and re-computation of demand. The appellant's failure to pay service tax and the inclusion of hand loan amounts in the taxable value were crucial points. The decision upheld the re-computation of the tax liability and allowed partial relief to the appellant while dismissing the Revenue's appeal.