Waiver of Penalty u/Sec. 76 - when demand of Service tax with interest confirmed

PJ/Case Laws/2011-12/1260

Case: Commissioner of Service Tax, Bangalore VS Lincoln Helios (India)Ltd

Citation: 2011 (23) S.T.R. 112 (Kar)

Issue:- Whether penalty imposed under Section 76 can be set aside when demand of service tax and interest leviable confirmed against respondent?

Brief Facts: - Respondent-assessee is a manufacturer and supplier of centralized lubrication system and it also undertakes erection and commissioning at site as a part of their business activity. They filed ST-3 return for the period ending 30-9-2003 claiming exemption in respect of erection and commissioning service as the consideration paid for the said amount was also included in the excisable value of the final products. The commissioning, erection and service rendered in that connection was brought under the services with effect from 1-7-2003. The assessee did not pay the service tax on the value of commission and erection services on the ground that it forms part of the finished product and that they have paid the excise duty on the same.

However, the Assessing Authorities held that the assessee is liable to pay the service tax on the value of erection and commissioning services. Therefore, they levied the service tax with interest and imposed penalty. Aggrieved by the same, the assessee preferred an appeal, the Commissioner (Appeals) dismissed the appeal upholding the order passed by the Assessing Authority.

In further appeal, the Tribunal upheld the levy of service tax but set aside the order regarding imposition of penalty. The assessee has accepted the order of the Tribunal and paid the service tax and interest thereon on the commissioning and erection of services.

It is the revenue which has preferred an appeal against the order of the Tribunal challenging setting aside the penalty on the assesses.

Appellant’s contentions:- Revenue contends that the penalty payable under Section 76 is automatic and there is no discretion left to the authorities to waive or reduce the penalty payable. More over, the Appellate Tribunal was in total error in coming to the conclusion that there are no mala fides on the part of the assessee without there being any material on record.

Respondent’s contentions:- Assessee contended that the assessee was throughout contending that Assessee has already paid the excise duty on the value of erection and commissioning services and till 26-6-2003, there was no service tax leviable on the said services which was not liable to pay. After contesting the matter before the Tribunal, he accepted the order of the Tribunal and paid the service tax as well as the interest payable thereon. Therefore in those circumstances, he submits that there is no liability to pay penalty as contended by the revenue.

Reasoning of Judgment:- The High Court observed that assessee undertakes not only manufacture and sale of its products but also erects and commissions the finished products. The customer is charged for the services rendered as well as the value for manufactured products. Admittedly, up to 20-6-2003 no service tax was leviableon erection and commission work. It was only subjected to tax from 1-7-2003. Assessee has paid the excise duty on the value of the product notwithstanding the services rendered. In that context, they were contending that there cannot be levy of tax under two parliamentary legislations. However, the excise duty was levied on the aspect of manufacture and service tax is levied on the aspect of services rendered. Therefore, it will not amount to payment of tax twice. After contesting the matter before the Tribunal, the Assessee has paid the Service Tax and interest thereon. It is in these circumstances, it cannot be said that there is willful attempt to evade the payment of tax on the part of the Assessee. Assessee gives a reasonable cause for not paying Service tax in view of Section 80. The Tribunal was justified in interfering with the levy of penalty and in setting aside the same. No infirmity found in the order of the Tribunal. Therefore, the substantial question of law framed in this Appeal is answered in favour of Assessee and against the revenue.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1260

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