Tribunal rules in favor of appellant, no service tax liability. Penalties annulled, interest confirmed.

The tribunal held that the appellant was not liable to pay service tax under works contract service as their activities did not fall under the defined scope. Consequently, they were not entitled to avail CENVAT credit. The demand for interest under Sec.73B was set aside, and penalties under Sec.77 of the Finance Act, 1994 were annulled due to the appellant's disclosure of doubts regarding tax liability. The tribunal confirmed the demand for amounts collected as service tax, set off deposits, and confirmed the reversal of ineligible CENVAT credit. Interest under Rule 14 of CCR was confirmed. The appeal was disposed of accordingly on 16.01.2019.

---

---

Issues Involved:
1. Liability to pay service tax under works contract service.
2. Entitlement to avail and utilize CENVAT credit.
3. Demand of interest under Sec.73B.
4. Imposition of penalties under Sec.77 of the Finance Act, 1994.

Detailed Analysis:

1. Liability to Pay Service Tax:
The appellant argued that they were liable to pay service tax based on CBEC circulars dated 01.08.2006 and 23.08.2007. The tribunal examined the definition of works contract service under Sec.65(105)(zzzza) and concluded that the appellant's activities did not fall under this definition. The appellant had undertaken to complete semi-built houses, which did not constitute residential complexes or new buildings or civil structures for commerce or industry. Therefore, the tribunal held that the appellant was not liable to pay service tax. The tribunal referenced the Supreme Court's ruling in Civil Appeal No.3327 of 2017 (CC, Mumbai Vs M/s Dilip Kumar & Co and others), emphasizing that tax liability must be clearly imposed by statute without room for implied concepts.

2. Entitlement to Avail and Utilize CENVAT Credit:
The tribunal found that since the appellant was not liable to pay service tax, they were not entitled to avail CENVAT credit. The appellant had wrongly taken CENVAT credit and used it to pay service tax. The tribunal ruled that there was nothing in the CENVAT Credit Rules, 2004 that allowed a person not liable to pay service tax to claim and utilize CENVAT credit for deposits under Sec.73A. The tribunal cited the Gujarat High Court's decision in CCE, Ahmedabad-II Vs Inductotherm India Pvt Ltd [2012 (283) ELT 359 (Guj.)], which held that CENVAT credit could not be used for deposits under Sec.11D of the Central Excise Act, a provision similar to Sec.73A of the Finance Act, 1994.

3. Demand of Interest under Sec.73B:
The tribunal set aside the demand for interest under Sec.73B, noting that this section applies to cases where an amount has been collected in excess of tax assessed or determined under Sec.73A(1). There was no corresponding provision for collecting interest under Sec.73B for amounts collected as tax under Sec.73A(2). Therefore, the demand for interest was not sustainable.

4. Imposition of Penalties:
The tribunal found that the appellant had disclosed their operations to the department and expressed doubts about their liability to pay service tax. Invoking Sec.80 of the Finance Act, 1994, the tribunal set aside all penalties imposed on the appellant.

Conclusion:
a) The demand under Sec.73A(3) read with Sec.73A(2) for amounts collected as representing service tax was confirmed, with amounts already deposited in cash set off against this demand.
b) The demand for interest under Sec.73B was set aside.
c) The demand for reversal of ineligible CENVAT credit was confirmed, treating the amount reversed as payment of service tax as reversal.
d) Interest under Rule 14 of CCR was confirmed for the period between taking the credit and its reversal.
e) All penalties were set aside under Sec.80 of the Finance Act, 1994.

The appeal was disposed of accordingly, with the judgment pronounced in the Open Court on 16.01.2019.

---