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Issues involved: Challenge to imposition of penalties under Section 76 and Section 77 of Finance Act, 1994 for failure to pay Service Tax on time.
Issue 1: Penalty under Section 76 of Finance Act, 1994 The appellant, engaged in paper printing industries, challenged the penalty of &8377; 51,481/- imposed under Section 76 for failure to pay Service Tax for the months of January to March 2005 on time. The appellant deposited the entire tax amount with interest before the show cause notice was issued. The advocate cited a CBEC letter stating penalties should not be imposed unless there is deliberate fraud or willful misstatement. Referring to a Tribunal case, it was argued that no penalty is imposable if the tax liability and interest are paid before the show cause notice is issued. The Tribunal found in favor of the appellant, noting compliance with the CBEC circular and the precedent set by the Tribunal in a similar case, and thus set aside the penalty. Issue 2: Penalty under Section 77 of Finance Act, 1994 Additionally, a penalty of &8377; 1,000/- was imposed under Section 77 for the same failure to pay Service Tax on time. The appellant's argument regarding the payment before the issuance of the show cause notice was reiterated. The Departmental Representative supported the Commissioner (Appeals)'s decision. The Tribunal, after considering both sides and the records, concluded that the appellant had indeed paid the tax before the show cause notice, aligning with the CBEC circular and the Tribunal's previous ruling. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.
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