2026 (2) TMI 432 - AT - Service Tax

Rectification of mistake and penalty quantification where contract price included service tax; application dismissed on record

Applications for rectification under the statutory provision are maintainable only for errors apparent on the record; they do not permit re appreciation ... Rectification of mistake - mistake apparent on the record - limited scope of Section 35C(2) - re-appreciation of evidence not permissible in rectification - penalty u/s 78 limited to confirmed demand - contractual inclusion of service tax in work-order price - distinction between factual findings and rectifiable patent error - HELD THAT:- We find that it is now well settled law that the application for rectification of mistake is maintainable only in cases where it can be pointed out that there is an error apparent on record. An error which has crept in while passing the order could have been subject matter for rectification. It is finding recorded even if erroneous could not be rectified by resorting to these provisions for which a provision of appeal has been made in the statute. We find that in respect of Section 78, we find that the applicant has sought to state para 4.9 (7) is upholding the penalty in respect of the demands set aside by the impugned order. We do not find any merits in the said submission, para 4.9 (7) is summarization of the findings recorded earlier and is to be read along with the para 4.8 of the order. We have clearly stated that the penalty under section 78 will be re-determined and will be equal to the demand upheld in the remand proceedings. Thus there is no error apparent in the this regrds. Even otherwise, as per provisions of Section 78, penalty under Section 78 could not be in excess of the total demand confirmed. We find that applicant has made an attempt to find out as looking through a magnifying glass to search for certain mistakes in the order to justify his application. We are very clear in our view that in respect of the amount dropped or remanded there cannot be any penalty under Section 78 more than the amounts confirmed in the remand proceedings. We do not find any justification in this ground. The demand confirmed in respect of RCC Bridge over the Baishaha Nala in the mining area of SECL, we do not find any merit in the submission by which I cannot be said that an error crept in our findings. Our findings are based on the available documents on record including work order signed between applicant and service recipient. Para 9 of the work order provides that value of work order is inclusive calculated @4.944% of quoted value then we do not find anything further to be considered while considering this application. As per the stipulations made in the work order issued by M/s South Eastern Coalfields Ltd. dated 19.11.2014, the total value of the work order has been determined after taking into exercise the service tax payable on the work value and this is as per the norms of the company i.e. SECL. Reliance which appellant sought to be placed would not held the case of the applicant either at the time of argument or now. We do not find any merits in this ground also. Thus, we do not find any merits in this application for rectification of mistake. Application is dismissed. Issues: Whether the Rectification of Mistake Application under Section 35C(2) of the Central Excise Act, 1944 (as made applicable to service tax matters by Section 83 of the Finance Act, 1994) and Rule 31A of the CESTAT (Procedure) Rules, 1982, identifying alleged errors in the Tribunal's Final Order dated 01.08.2025, is maintainable as a mistake apparent on the record and therefore liable to be allowed.Analysis: The Tribunal examined the scope of Section 35C(2) and the settled principles governing rectification applications. It applied the established tests that a rectifiable mistake must be patent, manifest and self-evident on the face of the record and not require re-appreciation of evidence or a long-drawn process of reasoning. The Tribunal considered the appellant's contentions concerning (i) penalty under Section 78 being sustained despite remand/reduction of demand, (ii) classification of the RCC bridge works and applicability of Mega Exemption Notification Clause 13(a), and (iii) characterization of ash bund/ash dyke as a dam exempt from service tax. The Tribunal held that the challenged findings were based on factual material, the work orders and clause 9 relating to service tax inclusions, and on submissions made during hearing; correcting those would require reappreciation of evidence or reconsideration of findings of fact or law, which is beyond the limited jurisdiction under Section 35C(2). The Tribunal further observed that penalty under Section 78 cannot exceed the confirmed demand and that remand/re-quantification does not create an apparent clerical mistake warranting rectification. Relevant precedent and principles regarding the limited remedy of rectification were applied.Conclusion: The Rectification Application is not maintainable as no patent or manifest mistake apparent on the face of the record was shown; the application is dismissed. (Conclusion: In favour of Revenue)