Provisions of section 80 applicable in case of bonafide belief.

PJ/Case Law/2013-14/1609

Case:-VASCON ENGINEERING PVT LTD Vs C.C.E., CHANDIGARH

Citation:-2013-TIOL-838-CESTAT-DEL

Brief Facts:- Brief facts of the case are that the assessee is registered for service tax under "Commercial and Industrial Construction" and "Residential Complex Construction Service' with effect from 10.9.2004 and 16.6.2005 respectively. It was observed by the department that assessee received an amount on account of Maintenance and Repair of immovable property of their client M/s Cipla Ltd., Baddi during the period May 2006 to December 2006. It was contention of the Department that services provided by the assessee falls under Category of Management, Maintenance and Repair service and is taxable with effect from 1.5.2006. Abatement of 67% of taxable value availed by the assessee under Notification No. 1/2006 dated 1.3.2006 is applicable to Commercial and Industrial Construction Service only and not to Management, Maintenance and Repair service. Accordingly, a Show Cause Notice demanding service tax short paid by them was issued. Notice was adjudicated by Joint Commissioner who vide his Order-in-Original confirmed the service tax along with interest. Penalties under Section 76 and Section 78 were also imposed on the assessee. Assessee filed an appeal before Commissioner (Appeals) who vide the impugned order set aside the penalty imposed under Section 76 of the Act and penalty imposed under Section 78 of the Act was reduced to 25% of tax amount. Assessee has challenged this order before this Tribunal in the present appeal. Revenue has also challenged the impugned order on the ground of reduction of penalty.

Appellant’s Contention:- The appellant submits that they are engaged in activity of construction of buildings and are covered under Commercial and Industrial Construction service and also doing repairs of buildings. Repairs of building is covered under Section 65(25) of the Finance Act and not under 65(64) of the Act as contested by Revenue. He fairly submits that since amount is small and they have paid the service tax along with interest as early in Feb. 2008, they are not contesting service tax but there is no case for imposition of penalty on them. He submits since there are two interpretations about classification of service under 65(25b) and 65(64) there is reasonable cause for failure of payment of service tax and benefit of Section 80 of the Finance Act is applicable to them.

Respondent’s Contention:- On the other hand, ld. DR submits that original authority has rightly imposed the penalty equal to tax amount and it was not proper for Commissioner (Appeals) to reduce it to 25% of tax amount.

Reasoning of Judgment:- After hearing both sides, we find that assessee was paying service tax under category of Commercial and Industrial Construction and Residential Complex Construction Service prior to 1.5.2006. Service tax on maintenance and repairs was also being paid by them under Section 65(25) of the Finance Act after availing abatement of 67% under Notification No. 1/2006 dated 1.3.2006, Revenue demanded service tax short paid by them under Maintenance and Repair under Section 65(64) of the Finance Act. As ld. Advocate for assessee not contesting the demand of service tax as amount is small and tax along with interest already paid by them, we are not going into question of classification of Maintenance and Repair activity involved in this appeal.

We find that assessee was under bona fide belief that maintenance and repair of building was covered under Section 65(25)(b) and service tax was being paid by them. We are therefore of the view that there is reasonable cause for not paying service tax short paid by them and benefit of Section 80 of the Finance Act 1994 is available to the assessee. Accordingly, we set aside the penalty confirmed by the Commissioner (Appeals) and consequently reject the Revenue's appeal.

Decision:- Revenue's appeal is rejected and assessee's appeal is allowed in respect of penalty only.

Comment:- The essence of this case is that if short payment of service tax was on account of bonafide belief and the said short payment was paid along with interest, then the benefit of Section 80 of the Finance Act 1994 will be available to the assessee.

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PJ/Case Law/2013-14/1609

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