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September 2011

Penalty — Misdeclaration of value of taxable service with intent to evade — Short payment due to assessee’s understanding of non-liability — Finding that assessee not having requisite mens rea — Tax paid with interest — Revenue’s appeal for levying penalty u/s.78 dismissed.

By Puloma Dalal
Jayesh Gogri
Chartered Accountants
Reading Time 2 mins
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(2011) 23 STR 3 (P & H) — Commissioner of Central Excise  v. Ess Ess Engineers.

Facts:

The assessee was inter alia engaged in providing of taxable service of ‘Erection, Commissioning and Installation’. The assessee failed to pay service tax for the services rendered during 1-7-2003 to 30-9-2006, in respect of which a show-cause notice was issued against them. The Tribunal set aside the levy of penalty holding that the failure of the assessee to pay the service tax was on account of the bona fide belief that it was not payable. The Revenue contended before the High Court that the penalty imposed u/s.78 of the Finance Act, 1994 should not have been interfered with as the assessee was guilty of misdeclaration of value of taxable service with intent to evade the service tax. Questions of law related to whether CESTAT order was proper and legal and whether or not there was a positive evidence of deliberate misdeclaration.

Held:

The Court dismissing the appeal for penalty held that the finding of the Tribunal was not shown to be perverse in any manner as the circumstances of the case of bona fide belief that there was no service tax applicable on fabrication and dismantling did not warrant invoking of section 78.

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