The Chandigarh Bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) set aside the penalty in the absence of intention to evade tax as the service tax was paid by the assessee after availing abatement of 67 % along with interest.
The Appellant, Passi Construction challenged the impugned order passed by the Commissioner (Appeals) of Central Excise, Chandigarh-I whereby the Commissioner (Appeals) has confirmed the demand of service tax and also dropped the amount of service tax of Rs. 11,47,641/- deposited by the appellant and gave cum tax benefit.
The Commissioner (Appeals) also did not extend the benefit of 67% of abatement under Notification No. 1/2006-ST dated 01.03.2006. However, he has dropped the penalty under Section 76 of the Finance Act, 1994, but has not extended the benefit of Section 80 and also confirmed the penalties under Sections 77 and 78 of the Act.
The appellant engaged in providing services to the building and civil structure or a part thereof, falling under the category of “Commercial or Industrial Construction Services”. During the audit of the records of M/s Ganga Acrowools Ltd, it was observed that the appellant had received Rs. 3,08,64,546/- for providing commercial or industrial construction services to them. It appeared that the appellant was required to pay a service tax of Rs. 37,53,353/- w.e.f. 22.06.2006 which was not paid by the appellant.
A show cause notice was issued to the appellant demanding service tax along with interest and penalty. The appellant filed a detailed reply to the show cause notice and submitted that they have already discharged their service tax liability by paying Rs. 11,04,433/- with interest of Rs. 60,020/- in 2008 for the said receipt of Rs. 3,08,64,546/- being inclusive of material (after availing abatement under Notification 1/2006) and Cum tax benefit as per Section 67(2).
After following due process, the Adjudicating authority confirmed the demand for Service Tax of Rs. 37,53,353/- under Section 73 and ordered recovery of Interest under Section 75 and also imposed penalty under Sections 76, 77 & 78.
The appellant submitted that the impugned order is not sustainable in law as the same has been passed without appreciating the facts and the law. It was argued that the invoices which were raised by the Appellant to the Party made it clear that the Appellant was providing composite service which involved the supply of material alongwith service.
On the other hand, the respondent reiterated the findings in the impugned order and submitted that the Commissioner (Appeals) has rightly denied the benefit of abatement as provided in Notification No. 01/2006-ST dated 01.03.2006.
It was evident that the appellant had provided sufficient evidence to show that it was a works contract. Moreover, the service recipient has also issued a certificate dated 30.12.2010 to the Appellant, whereby the Service Recipient has certified that all work undertaken by the Appellant is inclusive of material and goods required for completion of the job/contract.
A two-member bench of Mr S S Garg, Member (Judicial) And Mr P Anjani Kumar, Member (Technical) found that the substantial demand is barred by limitation because the department has not been able to establish that the appellant had intended to evade the payment of service tax which is essential ingredients to invoke the extended period of limitation.
“Since the Audit, the appellant paid the service tax after availing the abatement of 67% alongwith interest and therefore, it can safely be said that there was no intention to evade the payment of service tax, the penalties under Section 77 and 78 are not liable to be imposed on them. “, the Tribunal held. The CESTAT allowed the appeal.
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