Appellant liable for service tax and interest, penalty upheld under Section 77, set aside under Sections 76 and 78.

The Tribunal held that the appellant was liable to discharge the service tax along with interest, upholding the penalty under Section 77 of the Finance Act, 1994. However, penalties under Sections 76 and 78 were set aside due to the absence of intent to evade tax, attributing non-payment to a misinterpretation of the law. The appeal was disposed of with the appellant being held responsible for service tax and interest, with the penalty under Section 77 upheld, but penalties under Sections 76 and 78 being set aside.

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Issues involved:
Service tax liability on desilting activity under dredging services category.

Analysis:
The appeal was filed against an order-in-original regarding the service tax liability on the appellant for desilting the Mithi River. The appellant argued that the desilting activity was not related to a river but to a water body that drained water from a man-made source. The appellant referred to a previous case where penalties were set aside. The Departmental Representative contended that the appellant was aware of the service tax liability but failed to discharge it, leading to correctly imposed penalties.

The Tribunal held that the issue was covered by a previous judgment and ruled that the appellant was liable to discharge the service tax along with interest. The penalty of Rs. 1000 under Section 77 of the Finance Act, 1994, was upheld. However, regarding penalties under Sections 76 and 78, the Tribunal found no intent to evade service tax as the desilting contract was awarded by the Government and was public knowledge. The non-payment was attributed to misinterpretation of the law. Therefore, invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalties under Sections 76 and 78.

In conclusion, the appeal was disposed of with the appellant being held liable for service tax and interest, with the penalty under Section 77 upheld, but penalties under Sections 76 and 78 being set aside due to the absence of intent to evade tax.

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