Tribunal upholds service tax liability, waives penalty under Finance Act. Revenue appeal allowed.

The Tribunal ruled in favor of the Revenue, upholding the service tax liability on the respondent for the service portion of the contract. The Tribunal dismissed the contention that the demand was time-barred due to lack of evidence of informing the department about activities. The Tribunal waived the penalty under Section 76 of the Finance Act, 1994, considering the respondent's reasonable belief in the non-applicability of service tax. The Revenue's appeal was allowed, setting aside the previous order and imposing service tax liability on the respondent.

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Issues Involved:
1. Liability to discharge service tax on work executed under "Commercial and Industrial Constructions Service" or "works contract" from a specific period.
2. Whether the demand is time-barred.
3. Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:

Issue 1: Liability for Service Tax
The main issue in this case revolved around determining the liability of the respondent to discharge service tax on the work executed. The department contended that the work fell under "Commercial and Industrial Constructions Service," while the respondent argued it was a "works contract," making them liable for tax only from a certain date. The Tribunal referred to a previous case involving Larsen and Toubro Ltd., where it was held that even works contracts entered into before a specific date could be vivisected for service tax purposes. Following this precedent, the Tribunal ruled in favor of the Revenue, upholding the service tax liability on the respondent for the service portion of the contract.

Issue 2: Time-Barred Demand
The respondent raised the argument that the entire demand was time-barred. However, the Tribunal found no merit in this argument as there was no evidence to suggest that the respondent had informed the department about the activities. Therefore, the Tribunal dismissed the contention of the demand being time-barred.

Issue 3: Penalty Imposition
Regarding the imposition of penalty under Section 76 of the Finance Act, 1994, the Tribunal considered the respondent's argument that they had a bona fide belief in the non-applicability of service tax on the contract. Given that the issue of vivisecting composite contracts was a matter of dispute until a full Bench of the Tribunal concluded it in March 2015, the Tribunal waived the penalty under Section 76. By invoking the provisions of Section 80 of the Finance Act, 1994, the Tribunal decided not to impose the penalty, considering the respondent's reasonable cause for not discharging the service tax during the material period.

In conclusion, the Tribunal allowed the Revenue's appeal, setting aside the impugned order and upholding the service tax liability on the respondent for the service portion of the contract. The Cross Objection filed by the respondent was also disposed of accordingly.

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