Tribunal waives penalties for delayed tax payment citing appellant's genuine belief and industry-wide challenge.

The Tribunal found in favor of the appellant, ruling that penalties under Sections 77 and 78 of the Finance Act, 1994 were waived. Despite the ongoing litigation regarding the taxability of construction services, the appellant paid the service tax and interest before the issuance of a show cause notice. The Tribunal considered the appellant's bona fide belief for the delayed payment and the industry-wide challenge to the levy of service tax, ultimately concluding that there was sufficient cause for the non-payment of service tax. The impugned orders were modified, and the appeals were allowed on 15.5.2018.

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Issues:
Appellant's liability for penalties under Section 77 and 78 of the Finance Act, 1994 due to non-payment of service tax for construction of residential complex.

Analysis:
The appellant, engaged in the construction of residential complexes, did not pay service tax despite obtaining registration. An inquiry revealed the non-payment of service tax for taxable services provided from 1-7-2010. The appellant paid the entire service tax with interest before a show cause notice was issued, leading to the present appeal seeking the waiver of penalties under Sections 77 and 78 of the Finance Act, 1994.

The appellant argued that the taxability of construction of residential complexes was under litigation, with an interim stay granted by the Bombay High Court. Despite this, the appellant obtained registration without waiting for the court's judgment and paid the entire service tax liability with interest. The appellant cited various decisions and claimed a bona fide belief for the delayed payment, invoking Section 80 of the Finance Act, 1994, to argue against the imposition of penalties.

The Revenue, represented by the Addl. Commissioner, reiterated the findings of the impugned order, maintaining the stance on penalties.

The Tribunal considered the submissions and records, focusing on whether the appellant was liable for penalties under Sections 77 and 78. It noted that the taxability of construction services was under challenge before the Bombay High Court and the Supreme Court, with the entire industry contesting the levy of service tax. Despite the ongoing litigation, the appellant paid the service tax and interest. Citing consistent Tribunal views on penalties for construction services, the Tribunal found sufficient cause for non-payment of service tax and waived the penalties under Sections 77 and 78, modifying the impugned orders accordingly. The appeals were allowed in favor of the appellant.

The judgment was pronounced on 15.5.2018 by the Tribunal comprising Mr. Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical).

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