2004 (2) TMI 2 - AT - Service Tax

Interpretation of minimum penalty u/s 76 of the Finance Act, 1994 (F.A. 94) - Service Tax - Delay in filing ST-3 returns and paying service tax - Penalty - whether there is a discretion with the adjudicating authorities not to impose the minimum penalty under the said Section 76 for delay in paying the service tax and also for imposition of penalty for non-registration and delay in filing return - HELD THAT - The construction of Section 76, as has been interpreted by some of the Tribunal Benches, clearly requires that the penalty shall not be less than one hundred rupees. The law as such does not require the amount of penalty to be read as one hundred rupees for every day of delay. The language of the section does not warrant the expression for every day during which such failure continues to qualify one hundred rupees since such expression has been put only after the words but which may extend to two hundred rupees. Since the said section provides for payment of tax as well as the interest to take care of any pecuniary advantage gained by the tax payer by delayed payment of tax, it is understandable that the minimum penalty prescribed is Rs. 100/- only and not Rs. 100/- per day which would be draconian in its effect. The rationale for prescribing a minimum penalty of Rs. 100/- is also understandable as a smaller amount than that would be a paltry amount not worth the effort of collecting it. I, therefore, hold that the minimum penalty prescribed under the said Section 76 of F.A. 94 is Rs. 100/- only and not Rs. 100/- per day of delay. The section 80, clearly authorises the adjudication authorities to exercise their discretion in not imposing any penalty for delay in payment in service tax and delay in filing return if the assessee proves that there was reasonable cause for the said failure. However, no such discretion has been allowed in respect of penalty for failure to make an application for registration u/s 75A for which a small amount Rs. 500/- has been prescribed. Accordingly, I hold that the adjudicating authorities have discretion not to impose any penalty for delay in paying service tax and for delay in furnishing return in terms of Section 80 of F.A. 94, but they have no such discretion for not imposing penalty for failure to apply for registration. Thus, I set aside the impugned orders and remand these cases to the original authorities for re-decision in the light of the above finding after affording a reasonable opportunity of hearing to the appellants. Appeals are allowed by way of remand.

Issues Involved:
1. Interpretation of minimum penalty u/s 76 of the Finance Act, 1994 (F.A. 94).
2. Discretionary power of adjudicating authority in imposing penalties u/s 76.
3. Discretionary power in imposing penalties for delay in registration and filing returns u/s 75A and 77.
4. Applicability of Section 76 when service tax is paid after some delay.

Summary:

Issue 1: Interpretation of Minimum Penalty u/s 76 of F.A. 94
The Tribunal examined whether the minimum penalty prescribed under Section 76 of F.A. 94 is Rs. 100/- per day of delay or Rs. 100/- only. It was concluded that the minimum penalty is Rs. 100/- only and not Rs. 100/- per day of delay. The Tribunal reasoned that the language of Section 76 does not warrant the expression "for every day during which such failure continues" to qualify the minimum penalty of Rs. 100/-. The section's construction indicates that the penalty shall not be less than Rs. 100/- but may extend to Rs. 200/- for each day of delay, with the maximum penalty not exceeding the unpaid service tax amount.

Issue 2: Discretionary Power of Adjudicating Authority u/s 76
The Tribunal held that adjudicating authorities have discretion under Section 80 of F.A. 94 to not impose penalties for delay in paying service tax and filing returns if the assessee proves reasonable cause for the failure. Section 80 states, "no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure." This provision allows for discretion in penalty imposition except for failure to apply for registration u/s 75A.

Issue 3: Discretionary Power in Imposing Penalties u/s 75A and 77
The Tribunal found that while discretion exists for penalties related to delay in paying service tax and filing returns, no such discretion is provided for penalties related to failure to apply for registration u/s 75A. The prescribed penalty for non-registration is a small amount of Rs. 500/-, and the adjudicating authorities must impose this penalty without discretion.

Issue 4: Applicability of Section 76 When Service Tax is Paid After Delay
The Tribunal rejected the argument that Section 76 does not apply to cases where service tax has been paid after some delay. It was clarified that Section 76 applies to any person who fails to pay service tax by the due date, including those who eventually pay the tax after the due date. The section's construction, which includes penalties for each day of continued failure, supports this interpretation.

Conclusion:
The Tribunal set aside the impugned orders and remanded the cases to the original authorities for re-decision in light of the above findings. The original authorities are to provide a reasonable opportunity of hearing to the appellants before making a new decision. Appeals were allowed by way of remand.

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