Tribunal waives service tax liabilities for applicants upon Rs. 15,00,000 pre-deposit

The Tribunal directed applicant No.2 to make a pre-deposit of Rs. 15,00,000/- within 8 weeks, with the balance amount of service tax, interest, and penalties against both applicants waived off during the appeal's pendency. Compliance was to be reported by 24.03.2015.

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Issues:
Waiver of pre-deposit of service tax demand and penalty under the Finance Act, 1994.

Analysis:
The case involved the applicants seeking waiver of pre-deposit of service tax demand of Rs. 11,07,81,203/- along with interest and penalties, and a penalty of Rs. 10,000/- imposed on them under section 77 of the Finance Act, 1994. The applicants were sub-contractors engaged in fabrication, installation, and commissioning activities for various projects. Discrepancies were found in the payment of service tax by the applicants based on whether the service tax element was separately mentioned in the contracts. The demand of service tax was confirmed against the applicants under the category of Erection, Installation, and Commissioning Service (EICS) for the period between 01.10.2006 to 30.11.2011. Both applicants sought waiver of pre-deposit of the demands and penalties confirmed against them.

The counsel for applicant No.2 argued that they believed their activities were exempt from service tax as they were engaged in EICS of ports, which they thought was exempt. Reference was made to previous tribunal cases supporting their position. The counsel highlighted that applicant No.2 had already paid a significant sum along with interest, which should be considered sufficient for their appeal. On the other hand, the counsel for applicant No.1 contended that the penalty imposed on them was unjust as they were the service recipient and not liable for determining service tax, which was the responsibility of applicant No.2. The penalty under section 77 of the Finance Act, 1994 was deemed inapplicable as there was no omission or commission on the part of applicant No.1.

The Departmental Representative opposed the arguments, pointing out statements indicating that applicant No.1 advised applicant No.2 not to pay service tax in certain cases where the service tax element was shown as 0. The Department argued that applicant No.2 could not claim a bona fide belief defense as they did not pay the service tax despite being aware of the situation. It was also highlighted that in similar cases, the Tribunal had directed full pre-deposit as demanded in the adjudication order.

After hearing all parties, the Tribunal considered the main work assigned in the work orders, which was fabrication. Referring to previous tribunal decisions, it was established that for fabrication work, service tax cannot be levied. Consequently, the Tribunal directed applicant No.2 to make a pre-deposit of Rs. 15,00,000/- within 8 weeks, with the balance amount of service tax, interest, and penalties against both applicants waived off during the appeal's pendency. Compliance was to be reported by 24.03.2015.

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