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TMI Blog2019 (2) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, in the matter of Commissioner of Central Excise, Vapi v. Kisan Mouldings Limited [2010 (9) TMI 451 - SUPREME COURT OF INDIA], following the ratio of Rajasthan Spinning and Weaving Mills case, the Hon’ble Supreme Court has held that since it is a case of bona fide mistake and there was no intention to evade tax by the respondent, penalty was rightly not imposed. Thus, it is quite vivid that presence of mens rea is absolutely necessary ingredient for imposing penalty under Section 78 of the Finance Act, 1994, as laid down by the Hon’ble Supreme Court - In the present matter, the Appellants were under a bona fide belief that they were not liable to pay Service Tax for construction services. The conduct of the appellant of prompt paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court of Judicature at Bombay by way of writ petition on the ground that the activities by the builders cannot tantamount to provision of any taxable service and therefore no service tax was to be paid. Since there was confusion in the entire construction industry at that time therefore neither the Appellant collected service tax from the buyers nor paid the same till the matter was finally decided by the Hon ble High Court on 20.1.2012 by which the Hon ble High Court upheld the constitutional validity of the amendment made by the Government. Thereafter on 2.3.2012 the anti-evasion team visited the office of appellant and found that the Appellant was not discharging service tax liability on the construction services nor declaring the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to pay the service tax in view of the amendment in the relevant sections of Finance Act and therefore the penalty u/s. 78 ibid cannot be imposed on the Appellant. The ld. Authorised Representative re-iterated the findings recorded in the impugned order and prayed for dismissal of the Appellant filed by the appellant. 4. I have heard ld. counsel for the Appellant and ld. Authorised Representative for the Revenue and perused the record. The relevant provisions of the Finance Act, 1994 which are relevant for deciding the issue are reproduced as under:- 78. Penalty for suppressing value of taxable service. - If the Central Excise Officer in the course of any proceedings under this Chapter is satisfied that any person has, with inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion amongst the builders and the Maharashtra Chamber of Housing Industry even filed a writ petition before the Hon ble High Court on which the Hon ble High Court has passed the order on 23.7.2010 of no coercive steps against the builders for recovery of service tax. The said order of no coercive steps was in force upto January, 2012 when the said writ petition was finally decided by the Hon ble High Court upholding the constitutional validity of the aforesaid amendments. There is no reason not to accept the reasoning given by the ld. counsel for the appellants that they were not aware about the final decision of the Hon ble High Court, because as soon as the anti-evasion team visited the office of the appellants in the month of March, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 and it was admitted by the Hon ble High Court on 29-3-2007. We find that the department was represented by the standing counsel before the Hon ble High Court and department s Affidavit was filed on 29-9-2006, which admitted the contentions that the appellants were engaged in importing of rough diamonds and have paid commission to the brokers through whom they procured diamonds from DTC. If the department was aware of writ petition filed by the appellants and have filed an affidavit in September, 2006, nothing prevented them from issuing protective demand notices in order to safeguard the revenue. As has been already reproduced hereinabove, we find that bulk of the show cause notices were issued by the Revenue Department in 2011 invokin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld with interest and we do so, to that extent appeals are rejected. 10. This takes us to the issue of penalties imposed on the appellants under various provisions of the Finance Act, 1994. We find that the appellant need not be visited by penalties under the various sections of the Finance Act inasmuch, they could have entertained the bona fide belief as to that their writ petition may be decided in their favour. Invoking the provisions of Section 80 of the Finance Act, 1994, we find that the appellants have made out justifiable reason for setting aside the penalties imposed on them. Invoking the said provisions of Section 80 of the Act, we set aside the penalties imposed on all the appellants herein to that extent the appeals are a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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