Tribunal confirms service tax demand for construction service post-2007, modifies penalty order

The Tribunal confirmed the demand for service tax under Construction of Industrial or Commercial Complex service for the period after 1.6.2007, holding the appellant liable despite their argument that the main contractor should bear the responsibility. Penalties under section 78 were set aside due to the appellant's lack of awareness of the tax liability, while the demand and penalty under section 77 were upheld. The appeal was partly allowed, modifying the order to only set aside the penalty under section 78.

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Issues: Confirmation of demand under Construction of Industrial or Commercial Complex service, liability to pay service tax, penalties imposed.

Confirmation of Demand: The appellant was aggrieved by the confirmation of demand under Construction of Industrial or Commercial Complex service for not paying service tax on services rendered since 10.9.2004. The original authority confirmed the demand for the period 10.9.2004 to 31.3.2008. In appeal, the demand for the period prior to 1.6.2007 was set aside, but the demand for the period from 1.6.2007 to 31.3.2008 was confirmed by the Commissioner (Appeals), leading the appellant to approach the Tribunal.

Liability to Pay Service Tax: The appellant contended that they were not liable to pay service tax as they believed BSNL, the main contractor, was responsible for discharging the service tax. The appellant argued that they were unaware of the service tax liability and that BSNL should be liable to pay. However, records showed that the appellant had undertaken civil construction work for BSNL but did not pay service tax. The appellant claimed that all tax compliance matters were handled by BSNL and they were not informed about the service tax liability. The Tribunal noted that the issue of works contract service being subject to service tax was settled by the Supreme Court in a previous case and upheld the demand after 1.6.2007.

Penalties Imposed: The appellant pleaded for the penalties to be set aside. The Tribunal considered the contentious nature of the issue and the appellant's claim of being unaware of the service tax liability. Consequently, the Tribunal set aside the penalties imposed under section 78 of the Finance Act, 1994, while upholding the demand confirmed after 1.6.2007 and the penalty imposed under section 77 of the Finance Act.

In conclusion, the impugned order was modified to set aside the penalty imposed under section 78 only, and the appeal was partly allowed with consequential relief if any.

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