2018 (11) TMI 750 - AT - Service Tax

Demand of interest and penalties - Construction of residential complex services - misdeclaration of taxable value in ST3 returns by not including the cost of undevided share of the land - short payment of tax - appellant has paid the entire service tax before the issuance of SCN - Held that - The Central Government brought amendment in Section 129 and amended Rule 2A with retrospective effect and also provided that no person should be punished for an offence which would not have been punishable had this Section not come into force. There was reasonable cause for not paying the service tax during the impugned period as there was confusion with regard to legal provisions which was made clear in 2017 by way of amendment in Rule 2A. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appeal by Commissioner(Appeals) regarding non-payment of service tax for construction services; Interpretation of legal provisions post-amendment in Section 129 of the Finance Act, 2017; Application of penalties for non-payment of service tax; Invocation of erstwhile Section 80 of the Act for waiving penalties; Reasonable cause for non-payment of service tax; Precedents cited by the appellant; Sustainability of the impugned order.

Analysis:
The case involved an appeal challenging the rejection of the appellant's appeal by the Commissioner(Appeals) concerning non-payment of service tax for construction of residential complex services. The Department alleged that the appellant had not paid the applicable service tax, resulting in short payment of &8377; 18,60,336. The appellant contended that they had paid &8377; 18,49,462 before the show-cause notice was issued, and penalties should be waived due to the confusion regarding legal provisions. The appellant relied on the retrospective amendment in Section 129 of the Finance Act, 2017, which excluded certain costs from taxable value for a specific period. The appellant also invoked the erstwhile Section 80 of the Act for waiving penalties, citing precedents to support their argument.

Upon hearing both sides and examining the records, the Judicial Member found that the appellant had indeed paid the entire service tax before the show-cause notice was issued. The Judicial Member considered the retrospective amendment in Section 129 and the amended Rule 2A, which stated that no person should be punished for an offense that would not have been punishable before the amendment. Additionally, the Judicial Member noted the reasonable cause for non-payment of service tax during the disputed period, attributing it to confusion regarding legal provisions, which were clarified in 2017 through the amendment in Rule 2A. Based on these factors and the decisions cited by the appellant, the Judicial Member concluded that the impugned order was not sustainable in law and thus allowed the appeal of the appellant, setting aside the Commissioner(Appeals)'s decision.

Overall, the judgment focused on the retrospective amendment in Section 129, the waiver of penalties due to reasonable cause, and the clarification of legal provisions post-amendment, leading to the reversal of the Commissioner(Appeals)'s decision in favor of the appellant.