No penalty imposable on government organisation for non payment of service tax as there was bonafide belief.

PJ/Case Law/2013-14/2090

PJ/Case Law/2013-14/2090

Case:- MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO LTDVS COMMISSIONER OF CENTRAL EXCISE, PUNE-III

Citation:-2014-TIOL-21-CESTAT-MUM

Brief facts:- The appellant filed this appeal against the impugned order whereby a demand of Rs.4,61,847/- is confirmed with interest and penalties are imposed under Sections 76, 77 and 78 of the Finance Act. The demand is confirmed on the ground that the appellant provided consulting engineer service as defined under clause 31 of Section 65 of the Finance Act.

Appellant’s contention:-the contention of the appellant is that the appellant is a State Government organization and there is no intention to evade payment of duty. The appellant was under bona fide belief that as per the provisions of the Indian Electricity Act, 2003, the appellant is performing the statutory duties in respect of generation and supply of electricity.

Respondent’s contention:-The Revenue relied upon the findings of the lower authority and submitted that the appellant had not informed the Revenue regarding their activities and getting themselves registered with the Revenue, therefore the penalties are rightly imposed.

Reasoning of judgment:- The bench found that the issue regarding taxability of the activity undertaken by the appellant was already decided by the Tribunal in the case ofDiscom Ltd. vs. CCE final order dated 13.8.2009 in appeal No. ST/124/07. The Tribunal held that the activity undertaken by the appellant covers under ‘consulting engineer service'. In view of the above decision, no infirmity was found in the impugned order whereby the demand along with interest is confirmed.
In respect of the penalties, the contention of the appellant is that the appellant is a State Government organization and there is no intention to evade payment of duty. The appellant was under bona fide belief that as per the provisions of the Indian Electricity Act, 2003, the appellant is performing the statutory duties in respect of generation and supply of electricity. In these circumstances, the contention is that the imposition of penalties is not sustainable and the appellant relied upon the provisions of Section 80 of the Finance Act.
The Revenue relied upon the findings of the lower authority and submitted that the appellant had not informed the Revenue regarding their activities and getting themselves registered with the Revenue, therefore the penalties are rightly imposed.
The bench found that the provisions of Section 80 of the Finance Act, which provide as under:-
"Notwithstanding anything contained in the provisions of section 76, section 77 or first proviso to sub-section (1) of section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure."
Further it was found that the appellant is a Government Undertaking and in view of the provisions of Section 80 of the Finance Act, the penalties imposed under the impugned order are set aside. The appeal is disposed of as indicated above.

Decision:- Appeal disposed of on terms.

Comment:- The essence of this case is that electricity department is covered under the ambit of service tax net under the category of ‘consulting engineer service' and hence was liable to pay the service tax amount with interest. But as it was a government organization and there was no malafide intention to evade tax, therefore penalty was set aside by invoking the provisions of section 80 of the Finance Act, 1994.

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