2018 (11) TMI 1726 - AT - Service Tax

Appeal partially allowed on limitation ground, penalty set aside. Service tax, interest, and penalty quantification directed.

The Tribunal partially allowed the appeal based on the limitation ground, setting aside the penalty under Section 78 and directing the quantification of ... Imposition of penalty - non-payment of service tax - Management, Maintenance and Repair service or not - appellant had entered into contract with the Municipal Corporations for changing of electrical fittings, including bulbs, tubelights, vapour lamps as per the requirement of the corporations and their subscribers - extended period of limitation - HELD THAT:- The learned Commissioner (Appeals) has held that due to utter confusion regarding discharge of tax liability, the appellant did not pay the service tax and that there is no evidence of intention to evade such tax by the appellant. Sub-section (1) of Section 73 ibid deals with the provisions for recovery of service tax not levied or paid or short-levied or short-paid. The statute mandates that under such circumstances, the recovery can be effected within a period of 18 months from the relevant date, by issuing the show cause notice to the person concerned. However, the proviso appended to sub-section (1) of Section 73 ibid provides that in case of nonpayment of tax by reason of fraud; or, collusion; or, misstatement; or, suppression of facts; or, contravention of any of the provisions of Chapter V of the Finance Act, 1994 or the rules made thereunder with intent to evade payment of service tax, in place of 18 months, the show cause proceedings can be initiated within a period of 5 years from the relevant date. In this case, it is an admitted fact on record that the learned Commissioner (Appeals) vide the impugned order has set aside the penalty imposed under Section 78 ibid in the adjudication order, holding that there is no evidence of intention to evade tax by the appellant - Thus, under such circumstances, it cannot be said that the ingredients mentioned in proviso clause to Section 73(1) ibid are present, justifying initiation of proceedings for recovery of the adjudged demand beyond the normal period. Extended period of limitation - HELD THAT:- In the present case, since the period of dispute is from October 2006 to March 2011 and the show cause notice was issued on 27.03.2012, that part of the service tax demand confirmed on the appellant beyond the normal period cannot be sustained on the ground of limitation. The appellant is partly allowed on the ground of limitation and the impugned order is set aside to such extent. The original authority should quantify the actual amount of service tax along with interest and penalty under Section 76 ibid, which should be paid by the appellant - Appeal allowed in part and part matter on remand. Issues:1. Barred by limitation of time in show cause proceedings.2. Classification of services under Management, Maintenance and Repair service or works contract service.3. Imposition of penalty under Section 78 of the Finance Act, 1994.Analysis:1. The appellant contended that the show cause proceedings were time-barred as the notice was issued beyond the normal period of limitation. The learned Commissioner (Appeals) set aside the penalty under Section 78, stating no intention to evade tax. The Tribunal observed that recovery can be made within 18 months unless there is fraud, collusion, misstatement, suppression of facts, or contravention with intent to evade tax. As there was no evidence of intent to evade tax, the demand beyond the normal period was not sustainable. The appeal was partly allowed on the ground of limitation, setting aside the impugned order to that extent.2. The dispute arose regarding the classification of services provided by the appellant. The department classified them under Management, Maintenance and Repair service, while the appellant argued they should be considered works contract service. The Tribunal noted the confusion regarding tax liability discharge and lack of evidence of intent to evade tax. The learned Commissioner (Appeals) upheld the original order's demands. The Tribunal partially allowed the appeal on the limitation ground, directing the original authority to quantify the service tax, interest, and penalty under Section 76 to be paid by the appellant.3. The imposition of penalty under Section 78 of the Finance Act, 1994 was a significant issue. The appellant argued there was no element of suppression, wilful misstatement, or fraud to defraud government revenue. The learned Commissioner (Appeals) set aside the penalty under Section 78, emphasizing no intention to evade tax. The Tribunal considered the absence of evidence of intent to evade tax and ruled in favor of the appellant, partly allowing the appeal and setting aside the impugned order to the extent of limitation.In conclusion, the Tribunal partially allowed the appeal based on the limitation ground, setting aside the penalty under Section 78 and directing the quantification of service tax, interest, and penalty under Section 76 to be paid by the appellant.