Appeal partly allowed; penalty set aside. Upheld Service Tax liability for pre-completion sales.

The appeal was partly allowed. The penalty under Section 78 was set aside as the appellant had paid the tax before the show cause notice, with no evidence of fraud. The Service Tax liability for flats sold pre-completion certificate was upheld, while the demand for subsequent sales was dismissed.

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Issues Involved:
1. Suppression of facts with intent to evade payment of tax.
2. Applicability of mandatory penalty under Section 78 of the Finance Act.
3. Denial of benefit under Section 73(3) of the Finance Act.
4. Validity of show cause notice issued beyond the limitation period.
5. Liability of Service Tax for the sale of flats by the landowner before and after obtaining the completion certificate.

Issue-wise Detailed Analysis:

1. Suppression of Facts with Intent to Evade Payment of Tax:
The appellant was found to have suppressed facts with the intent to evade payment of tax, leading to the imposition of a mandatory penalty under Section 78 of the Finance Act. The Department argued that the appellant's failure to register and pay the Service Tax liability before the raid indicated suppression of facts. However, the appellant contended that he had registered and paid the Service Tax before the issuance of the show cause notice, negating any intent to evade tax.

2. Applicability of Mandatory Penalty under Section 78 of the Finance Act:
The penalty under Section 78 was imposed due to the appellant's non-payment of Service Tax before the raid. The appellant argued that since he had registered and paid the tax liability before the show cause notice, the penalty was unwarranted. The judgment referenced precedents where penalties were not imposed if the tax was paid before the show cause notice and no fraud or wilful intention was found.

3. Denial of Benefit under Section 73(3) of the Finance Act:
The authorities denied the benefit under Section 73(3), which allows for no further proceedings if the tax is paid before the show cause notice unless there is fraud or suppression of facts. The appellant argued that his actions did not constitute suppression or fraud, as he had complied with tax payment before the notice. The judgment concluded that the appellant's actions did not amount to fraud or wilful suppression, thus setting aside the penalty.

4. Validity of Show Cause Notice Issued Beyond the Limitation Period:
The appellant contended that the show cause notice issued on 19th October 2015 was time-barred, being beyond the one-year limitation period. The judgment did not specifically address this issue in detail, focusing instead on the appellant's compliance with tax payment before the notice.

5. Liability of Service Tax for the Sale of Flats by the Landowner:
The core issue was whether the landowner (appellant) was liable for Service Tax on flats sold before and after obtaining the completion certificate. The judgment clarified that the Service Tax liability was applicable to flats sold before the completion certificate was obtained (20th March 2012). Flats sold after this date and one flat gifted to the appellant's son were exempt from Service Tax. The judgment upheld the authorities' decision regarding the tax liability for flats sold before the completion certificate and dismissed the extra demand for subsequent sales.

Conclusion:
The appeal was partly allowed. The penalty imposed under Section 78 was set aside due to the appellant's compliance with tax payment before the show cause notice and lack of evidence for fraud or wilful suppression. The Service Tax liability for flats sold before the completion certificate was upheld, while the extra demand for subsequent sales was dismissed.

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