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Issues Involved: Penalty imposed under Section 76 and Section 77 of the Finance Act, 1994 for default in payment of Service Tax and delay in filing returns.
Penalty under Section 76: The appellants, engaged in testing and calibration services, defaulted in paying Service Tax for April 2002 to September 2003, leading to a penalty of &8377; 48,997/- imposed by lower authorities under Section 76. The appeal sought leniency in penalty amount, claiming ignorance of law as the reason for the default. However, the Tribunal found that ignorance of law does not constitute a "reasonable cause" under Section 80 of the Act, which provides for penalty exemption in certain cases. As the appellants were not eligible for Section 80 benefit, the penalty under Section 76 was upheld, and the appeal was dismissed. Penalty under Section 77: In addition to the penalty under Section 76, a penalty of &8377; 1000/- was imposed under Section 77 for the delay in filing Service Tax returns for the same period. The appellants argued that the delay was due to lack of awareness of the penal consequences. However, the Tribunal reiterated that ignorance of law does not qualify as a reasonable cause under Section 80, which exempts penalties in specific situations. As the appellants failed to prove a reasonable cause for the delay, the penalty under Section 77 was upheld along with the penalty under Section 76, leading to the dismissal of the appeal.
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