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2013 (3) TMI 252 - AT - Service TaxDemand of service tax and penalty - waiver of penalty u/s 80 - repair and overhaul of aircrafts of India Air Force, Army, Coast Guard and navy under the Ministry of Defence, Govt. of India - held that - the appellants were in correspondence with the Ministry of Finance seeking exemption on the maintenance and repair services of aircrafts pertaining to Ministry of Defence. Such correspondence resulted in denial of said request for exemption by Ministry of Finance on 26.7.2005. - In as much as the appellants were bonafidely contesting the issue before the appropriate authority and the appellants being a Govt. of India unit, no malafide with intent to evade the payment of duty can be attributed to them so as to invoke penalties. Provisions of section 80 of Finance Act, 1994 are required to be applied - there was a justifiable reason entertained by the appellants for non-payment of duty - While confirming the demand of duty, penalty set aside.
Issues:
1. Confirmation of Service Tax demand along with penalties for maintenance or repair services provided to the Ministry of Defence. 2. Contesting the demand on limitation grounds and imposition of penalties. 3. Exemption of penalties based on correspondence with the Ministry of Finance. Issue 1: Confirmation of Service Tax demand and penalties The Appellant, a Govt. of India undertaking engaged in aircraft maintenance, faced a confirmed Service Tax demand of Rs.3,77,09,729 along with penalties for providing services to the Ministry of Defence falling under 'maintenance or repair services' category. The demand was confirmed invoking a longer period of limitation. Issue 2: Contesting demand on limitation and penalties The Appellants contested the demand on limitation by stating their correspondence with the Ministry of Defence for exempting the services provided. They argued that penalties should not be imposed as they were in discussions for exemption. Despite the Appellants depositing the demand amount, they disputed the penalties imposed. Issue 3: Exemption of penalties based on correspondence The Commissioner confirmed the demand and penalties, citing the Appellants' awareness of their service tax liabilities and intention to evade payment. The Appellants, however, contended that they sought exemption through correspondence with the Ministry of Finance, which was rejected. The Tribunal, after considering submissions, confirmed the demand but set aside the penalties. It held that the Appellants, being a Govt. unit, had justifiably contested the issue with no intent to evade duty, applying section 80 of the Finance Act, 1994 to exempt them from penalties.
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