2018 (1) TMI 1332 - AT - Service Tax

Tribunal grants waiver of penalties in tax liability dispute over construction service categorization

M/s. Chettinadu Construction Company Versus CCE & ST, Madurai

The Tribunal ruled in favor of the appellants in a tax liability dispute concerning construction activities' service categorization. The appellants ... Penalty - case of appellant is that Since the contract was with reference to commercial construction and the site preparation is for that only, they had a bonafide belief that these are to be considered as construction service eligible for abatement - Held that:- Admittedly, the appellant discharged the service tax with interest and are not contesting the same - the penalties imposed can be waived by invoking the provisions of Section 80 as there is a reasonable cause for payment of differential service tax now confirmed by the lower authorities - penalties set aside - appeal allowed in part. Issues: Tax liability for construction activities under different service categories, eligibility for abatement under specific notification, dispute over service categorization, imposition of penalties, waiver of penalties under Section 80.The judgment involves a dispute regarding the tax liability of the appellants for construction activities categorized as 'Site Formation and Clearance, Excavation and Earth Moving and Demolition service' as opposed to 'Commercial and Industrial Construction Service' for which they believed they were eligible for abatement under Notification No. 1/2006-ST. The appellants, engaged in construction activities for a factory building, contested the Revenue's classification, leading to the denial of abatement. The appellants paid the differential service tax and interest before the order was passed, maintaining that their activities were part of commercial construction, warranting abatement. The Ld. Counsel sought the setting aside of penalties, not disputing the tax payment already made.The Tribunal acknowledged that the appellants had paid the differential service tax and interest, not contesting the same. After considering the submissions and the nature of the contract, the Tribunal concluded that the penalties imposed could be waived under Section 80 due to a reasonable cause for the payment of the differential service tax confirmed by the lower authorities. Consequently, the appeal was allowed to the extent of setting aside the penalties on the appellants.In summary, the judgment addressed the dispute over service categorization for construction activities, the eligibility for abatement under a specific notification, and the imposition of penalties. The Tribunal found in favor of the appellants, waiving the penalties under Section 80 based on the reasonable cause for the payment of the differential service tax.