2018 (8) TMI 1586 - AT - Service Tax

Penalty - the appellant has paid the entire demand of service tax - Commercial or Industrial Construction Service - period April 2007 to July 2008 - Held that - There is no evidence adduced by the department to establish that the appellants are guilty of suppression of facts with intention to evade payment of tax. Taking these aspects into consideration and the issue being an interpretational one penalty u/s 78 set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Penalty imposed under Section 78 for failure to discharge service tax in a construction project.

The appellant, engaged in commercial building construction, contested the penalty imposed for non-payment of service tax. The appellant had paid the service tax demand but disputed the penalty. The issue revolved around the liability to pay service tax under "Commercial or Industrial Construction Service" due to confusion and interpretational issues arising from circulars issued by the Board. The appellant argued that although the Order-in-Original (OIO) stated that service tax was collected, no separate collection was made by raising invoices. The appellant claimed that the failure to pay was due to the interpretational issue and requested the penalty under Section 78 to be set aside.

The Advocate for the appellant highlighted that the confusion regarding the liability to pay service tax was addressed in Circular No. 96/7/2007-ST and Circular No. 108/09-ST. The appellant, being a developer, was affected by the circulars clarifying the liability in cases of Joint Development of land. Additionally, the decision of the Hon'ble Guwahati High Court in the case of Magus Construction Pvt. Ltd. Vs. UOI was considered relevant. The appellant argued that there was no evidence of intentional evasion of tax, and the penalty under Section 78 was unjustified due to the interpretational nature of the issue.

After hearing both sides, the Tribunal found merit in the appellant's arguments. Considering the interpretational nature of the issue and the circulars clarifying the liability to pay service tax, the Tribunal held that the penalty under Section 78 was unwarranted. The impugned order was modified to set aside the penalty under Section 78 while upholding the demand for service tax and interest, along with the penalty under Section 77. The appeal was partly allowed on these grounds.