2026-VIL-1486-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Payment of differential service tax along with interest before adjudication order, exemption from levy of penalties under Sections 76 and 77 of the Finance Act, 1994 - Appellant was engaged in construction of residential and commercial projects. During FY 2011-12 there were various projects under construction. Certain projects had construction commenced before 01.06.2007 and were on-going - Appellant continued to pay tax on on-going projects as per new the Composition Scheme. Department disallowed benefit of new scheme for on-going projects and raised demand for differential service tax. Appellant paid differential service tax along with applicable interest and reversed Cenvat credit prior to passing of Order-in-Original - Whether penalties under Sections 76 and 77 can be imposed when entire differential service tax along with interest was paid by Appellant before adjudication order - HELD - The issue involved interpretation and applicability of valuation scheme which attained final clarity only after pronouncement of judgment by Supreme Court in Nagarjuna Construction Company Limited v. Union of India. Under such circumstances there was reasonable cause on part of Appellant for initial non-payment of differential tax - Appellant held bona fide belief that it was entitled to benefit of Composition Scheme even in respect of on-going projects. After pronouncement of judgment by Apex Court when legal position became clear, Appellant immediately paid differential amount of service tax along with applicable interest and also reversed Cenvat credit. Appellant is fully entitled to benefit of Section 80 of Finance Act 1994 which statutorily provides that no penalty under Section 76 or Section 77 shall be imposed if appellant proves that there was reasonable cause for said failure - The penalties imposed upon appellant under Sections 76 and 77 of Finance Act 1994 are not sustainable in law and accordingly set aside - The appeal is allowed - Service Tax - Revenue contended that learned Adjudicating Authority did not properly examine entire case and arrived at conclusion solely on basis of Chartered Accountant certificate placed on record by Appellant. Revenue alleged that learned Commissioner did not examine nature of income from activities other than construction and did not examine project-wise computations - Whether learned Adjudicating Authority properly examined entire case and verified computations project-wise or improperly relied solely on CA certificate without cross-examination - HELD - The ld. Commissioner has thoroughly examined records and recorded proper findings on all grounds raised by Revenue. The ld. Commissioner properly considered CENVAT Register, GAR-7 challans and reversal of CENVAT credit and reconciliation charts submitted by Appellant along with CA certificate - The learned Commissioner has categorically observed in order that he has carefully gone through facts, merits and circumstances of case on record. In order to clear any remaining doubts, appellant filed another CA certificate which clearly explained precise nature of said income. No infirmity found in order passed by learned Commissioner - The order of learned Commissioner is upheld and Revenue's appeal is dismissed
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