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The Commissioner of Central Excise & Service Tax, Kolhapur Versus M/s Honai Constructions

2016 (3) TMI 485 - BOMBAY HIGH COURT

Validity of Tribunal's order waiving the penalty - Scope of section 80 w.e.f. 14-5-2015 - Penalty imposed under Section 78 of the Finance Act, 1994 - Failure to pay Service tax - Service tax was not leviable at the time of execution of agreement but subsequently leviable during the time of subsistence and implementation of contract - Held that:- the Tribunal omitted from considering the fact that though the contract was executed prior to 10 September 2004, the same was a continuing contract and .....

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t, 1994 which was on the statute book till its amendment by Finance Act, 2015 with effect from 14 May 2015, is the question which has not been examined by the Tribunal at all. There is rather no reference to Section 80 of the Finance Act, 1994. As the Tribunal's order is cryptic and the reasons are wholly unsatisfactory, needs to be quashed and set aside. - matter restored before tribunal - Decided in favour of the revenue - Central Excise Appeal No. 273 of 2014 - Dated:- 1-2-2016 - S. C. Dhar .....

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eal and set aside the penalty imposed under Section 78 of the Finance Act, 1994. 2. The appeal before the Tribunal was directed only against that part of the order of Commissioner (appeals) where he sustained the penalty under Section 78 of the Finance Act, 1994 and upheld the imposition thereof. 3. The argument of the assessee was that it was constructing the factory for a cooperative spinning mill by virtue of an agreement of 19 October 2001. The assessee is in the business of civil constructi .....

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discovered the evasion of service tax. Once the service tax was leviable during the course of implementation of the contract, then, the obligation to pay the same was absolute. There is no question of then contending that there was a bona fide impression of the assessee about the levy not being attracted or any doubt, whether the contract attracted the service tax liability or not. That is how the show cause notice was issued; but an amount of ₹ 20 lakh was paid before the orderinoriginal .....

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ents; but had the inspection not been carried out by the Revenue, the further payments would not have been forthcoming. It is in these circumstances, he confirmed the penalty under Sections 77 and 78 but set aside penalty under Section 76 of the Finance Act, 1994. 5. The Tribunal set aside eventually all penalties. Mr.Jetly appearing for the Revenue by inviting our attention to paragraphs 2 to 4 of the Tribunal's order, would submit that Section 76 of the Finance Act, 1994 attracts penalty o .....

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reunder with a view to evade payment of service tax, then, penalty was mandatorily leviable. There was no reason for the Tribunal, therefore, to have granted any relief and on a specious ground that the assessee entertained a bona fide belief that it does not fall under the service tax law. The liability was discharged as soon as non payment was brought to the notice of the assessee. 6. Mr.Jetly would submit that this sort of reasoning is impermissible in the light of the judgment of Supreme Cou .....

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r and discretion to set aside the penalty and the conduct of the assessee was, therefore, a very relevant factor. The learned advocate for the Respondent-assessee would, therefore, submit that the appeal be dismissed. 8. Having perused the impugned order passed by the Tribunal, we find that the reasons that are assigned by the Tribunal are in paragraph 4. That paragraph reads as under : "4. Having considered the rival submissions, I find that in view of the on going contract which was enter .....

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ed from consideration the fact that though the contract was executed prior to 10 September 2004, the same was a continuing contract and obligation. The work continued. The Tribunal omitted the fact that there was an inspection of the premises in the year 2007 and that is how the assessee was called upon to pay the tax which was not paid till then. After that, an orderinoriginal was about to be passed on a show cause notice, but that was avoided by payment of the tax and discharge of the liabilit .....

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