The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal quashed the penalty imposed under the Finance Act, 1994 as the litigation was bona fide regarding the nature of the activity of the appellant, PSL Limited.
This appeal has been filed by M/s PSL Limited against the demand of service tax, interest and imposition of penalty under Sections 76, 77 and 78 of the Finance Act, 1994.
Counsel for the appellant pointed out that they are inter alia engaged in undertaking epoxy coating of pipelines. A demand was made under the head of Business Auxiliary Service for the activity of Epoxy Coating of pipelines undertaken by the appellant. The demand was raised after an audit objection. Learned counsel argued that the demand under the head of Business Auxiliary Service cannot be made.
The Authorized Representative relied on the decision of the Commissioner (Appeals) and also relied on the decision of the Tribunal in the case of PSL Corrosion Control Services Ltd. to hold that the activity undertaken by them classifies as Business Auxiliary Services. The Counsel further pointed out that the said decision of the Tribunal has been approved by the High Court.
It was observed by the High Court that “The revenue was aware of the respondent’s activities, it cannot be said that there was any suppression, misstatement or intent on the part of the respondent to evade service tax. Besides, the facts of the case indicate that there was a bona fide litigation going on as regards the nature of the activity carried on by the respondent. The Tribunal was, therefore, justified in setting aside the penalty imposed under Section 80 of the Finance Act, 1994.”
The Coram comprising Ramesh Nair, Judicial Member and Raju, Technical Member concluded that relying on the aforesaid decision of the High Court, while the demand of service tax and interest is upheld, the penalties imposed under Sections 76, 77 and 78 are set aside invoking Section 80 of the Finance Act, 1994.
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