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August 2012

Activity of retrofitting of CNG/LPG kits as authorised by Regional Transport Authority considered liable for service tax by Revenue — Paid service tax on receiving intimation through sales tax on same amount charged for kits fitted by them —Penalties set aside.

By Puloma Dalal, Jayesh Gogri, Chartered Accountants
Reading Time 1 mins
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Facts:

The appellant authorised by Regional Transport Authority retrofitted CNG/LPG engine kits. The Revenue took a view that this was liable for service tax as erection, commissioning and installation service. On being pointed out in August, 2008, the appellant obtained registration and paid the same in September 2008. This was done despite the fact that sales tax in the full value of kits was paid by the assessee and invoice did not show fitting charges separately. Four months later, a show-cause notice was issued proposing to levy penalty u/s.76, 77 and 78 of the Finance Act, 1994.

Held:

Considering the facts and circumstances wherein the assessee promptly paid service tax without contesting the liability on the ground of payment of VAT on full value established their bona fides. The case was considered fit one for which section 73(3) was applicable whereby no show-cause notice was required to be issued or section 80 could have been extended. Penalties were set aside.

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