2019 (6) TMI 17 - AT - Service Tax

Tribunal sets aside service tax liability on construction activities post-01.06.2007, emphasizes genuine belief

J. ALEX RAJA Versus COMMISSIONER OF CENTRAL EXCISE, TRICHY

The Tribunal allowed the appeal in favor of the appellants, setting aside the demand for service tax liability on construction activities and Cleaning ... Commercial or Industrial Construction Service - Composite contracts - Construction of office buildings and erection of transmission towers and other associated structures - HELD THAT:- For the period 01.06.2007, the demand will not in any case sustain in the light of the decision in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] - For the period after 01.06.2007, the ratio laid down by the decision of the Tribunal in the case of V. CHINNASAMY, A. ELANGO, VEE VEE CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [2018 (5) TMI 986 - CESTAT CHENNAI] relied upon by the learned advocate is applicable on all fours in respect of Construction Services provided by the appellant. For the period after 01.06.2007, the demand invoking the extended period of limitation with respect to Works Contract Service cannot sustain and will require to be set aside - the appellant will be liable to pay service tax for the normal period of limitation calculated from the date of issue of the show-cause notice. However, for the same reasons no penalty will be imposable under section 78 ibid for the normal period. Demand with regard to Cleaning Services - HELD THAT:- Ld. Advocate has conceded the tax liability. We do not therefore interfere with the demand of tax and interest - the penalty under section 78 ibid on this score also is unjustified - penalty imposed under section 77 ibid upheld. Appeal allowed in part. Issues:1. Service tax liability on construction activities.2. Applicability of service tax on Cleaning Services.3. Imposition of penalties under section 77 and 78 of the Finance Act, 1994.Issue 1: Service tax liability on construction activitiesThe appellants were engaged in construction activities for various entities but had not paid service tax. The show-cause notice proposed a demand for service tax liability on Commercial or Industrial Construction Service and Works Contract Service. The original authority confirmed the proposals, which were upheld by the Commissioner (Appeals). The appellant argued that for the period prior to 01.06.2007, the levy of service tax on composite contracts is not sustainable as per a Supreme Court decision. For the period after 01.06.2007, they claimed they were under the mistaken belief that services provided to government agencies were not taxable. The Tribunal held that the demand for the period after 01.06.2007 could not be sustained considering the appellants' belief and the clarification from CBEC. The demand invoking the extended period of limitation was set aside, and no penalty was imposed under section 78 for the normal period.Issue 2: Applicability of service tax on Cleaning ServicesRegarding the demand for Cleaning Services, the appellant accepted the tax liability but requested the setting aside of the penalty. The Tribunal upheld the tax liability and interest but deemed the penalty under section 78 unjustified, thereby not interfering with it. However, the penalty under section 77 was not disturbed.Issue 3: Imposition of penaltiesThe Tribunal allowed the appeal in favor of the appellants concerning the service tax liability on construction activities and Cleaning Services. It provided consequential reliefs and set aside the demand for the period after 01.06.2007 due to the appellants' genuine belief and the clarification from CBEC. The penalty under section 78 was not imposed for the normal period, but the penalty under section 77 was maintained.This judgment clarifies the service tax liability on construction activities and Cleaning Services, emphasizing the importance of the appellant's belief and relevant clarifications in determining tax obligations. The Tribunal's decision reflects a balanced approach in considering the circumstances and applicable legal principles while addressing the issues raised by the parties involved.