2021 (10) TMI 304 - AT - Service Tax

Tribunal rules in favor of appellants, grants tax refund and sets aside penalties.

The Tribunal ruled in favor of the appellants, finding no deliberate breach of law. The demand for service tax and penalties was deemed misconceived as ... Non-payment/short payment of service tax - works contract services provided to Rajasthan Rajya Vidyut Prasaran Nigam Ltd., a State PSU - time limitation - exemption to commercial nature of building - applicability of circular no.12/2012-ST read with exemption notification no.25/2012-ST - HELD THAT:- No case of contumacious conduct or conscious breach of law is made out in the facts and circumstances. Revenue has raised the demand in the show cause notice, which has been found to be misconceived by the Commissioner (Appeals), as the appellant was entitled to exemption. Further, the services rendered to the Government Companies post 30.06.2012, being of non-commercial nature, was also exempt under Notification No.25/2012-ST - all the demand of tax and penalties are fit to be set aside. Amount paid as tax is Revenue deposit, and directed to be refunded with interest (from the date of deposit till date of refund @ 12% P.A) - All penalties are set aside - Appeal allowed. Issues:1. Service tax liability for works contract services provided to a State PSU.2. Applicability of exemption notifications on service tax liability.3. Imposition of penalties under various sections of the Finance Act.Analysis:Issue 1: Service tax liability for works contract services provided to a State PSUThe appellants were engaged in providing works contract services to a State PSU. The Revenue alleged non-payment or short payment of service tax for the period 2010-2011 to 2014-2015. The demand was based on the service tax liability split between the service provider and the service recipient as per Notification No.30/2012-ST. The appellants had not registered for tax payment initially but did so later. The show cause notice demanded &8377; 7,75,082/- for the period in question.Issue 2: Applicability of exemption notifications on service tax liabilityThe appellants contended that the demand was time-barred and argued for exemption from service tax based on the nature of services provided to the State PSU. They relied on exemption notifications and circulars to support their claim that the services provided were exempt from service tax. The Commissioner (Appeals) examined the issue and determined the tax liability for different periods based on the notifications in force during those times.Issue 3: Imposition of penalties under various sections of the Finance ActPenalties were imposed on the appellants under Section 78, Section 77 (1)(a), Section 77 (1)(c), and Section 77 (2) of the Finance Act. The Commissioner (Appeals) upheld some penalties while dropping others. The appellants challenged the penalties, arguing that they were entitled to exemptions and had not evaded payment of service tax. They presented evidence of correspondence and actions taken to address issues related to service tax deductions.Final JudgmentThe Tribunal considered the contentions of both parties and found that there was no contumacious conduct or conscious breach of law by the appellants. It was determined that the demand for tax and penalties was misconceived as the appellants were entitled to exemptions under the relevant notifications. Therefore, the Tribunal allowed the appeals, directing the refund of the tax paid with interest and setting aside all penalties imposed. The appellants were granted consequential benefits in accordance with the law.In conclusion, the Tribunal ruled in favor of the appellants, granting relief from the service tax demand and penalties, emphasizing their entitlement to exemptions as per the applicable notifications and the absence of intentional evasion of tax payment.