2016 (2) TMI 942 - AT - Service Tax

Tribunal ruling on service tax classification and penalties for subcontractor in construction industry

Shree Constructions Versus Commissioner of Central Excise, Aurangabad

The tribunal upheld the classification of services under 'Commercial or Industrial Construction Services,' finding lack of evidence linking the work to ... Taxability - activity of excavation and disposal of soil on the site - whether the said service would fall under the head Commercial or Industrial Construction Services? - Held that: - the findings recorded by the first appellate authority that due to non clarity of the work under taken by the appellant, the classification of the services is under “Commercial or Industrial Construction Services” cannot be discarded, in the absence of any evidence to show that the work under taken by the appellant was in respect of the roads. The appellant could have entertained a bonafide belief that being sub-contractor they need not discharge any service tax liability. In our view, this is the fit case for invoking the provisions of Section 80 of the Finance Act, 1994, for setting aside the penalty impose by the lower authority - the service tax liability and the interest thereof upheld, but penalties imposed set aside, by invoking the provisions of Section 80 of the Finance Act, 1994. Appeal disposed off - decided partly in favor of appellant. Issues involved:Classification of services under 'Commercial or Industrial Construction Services'; Liability of subcontractor for service tax; Invocation of Section 80 of the Finance Act, 1994 for penalty imposition.Classification of services under 'Commercial or Industrial Construction Services':The appellant, a subcontractor, undertook excavation and disposal of soil on a site, contending that it was related to the construction and asphalting of a road. However, revenue authorities classified the activity under 'Commercial or Industrial Construction Services.' The appellate tribunal noted the lack of evidence proving the work was related to roads and upheld the classification.Liability of subcontractor for service tax:The appellant had paid the service tax liability along with interest before the issuance of a show cause notice. The department argued that the appellant, being in business for a long time, should have been aware of the service tax liability. The tribunal acknowledged that until August 2007, subcontractors were not required to pay service tax. Considering this, along with the appellant's bonafide belief that they were not liable for service tax, the tribunal upheld the service tax liability and interest but set aside the penalties imposed, invoking Section 80 of the Finance Act, 1994.Invocation of Section 80 of the Finance Act, 1994 for penalty imposition:The tribunal found that the appellant's belief that they were not required to discharge any service tax liability could be considered bonafide. Therefore, in the absence of evidence showing willful non-compliance, the tribunal set aside the penalties imposed by invoking the provisions of Section 80 of the Finance Act, 1994. The appeal was disposed of by upholding the service tax liability and interest while setting aside the penalties.