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Issues involved: Penalty u/s 78 of the Finance Act, 1994 for wilful breach of law and lawlessness, consideration of reasonable cause for delay in discharging service tax liability, imposition of penalty on a professional firm.
Summary: 1. The Ld. JDR argued for penalizing the appellant for wilful breach of law, emphasizing that lawlessness should not be allowed. He contended that the first appellate order should have confirmed the entire adjudication order without leniency, as the respondent submitted a nil return, failed to clarify facts, and only revised returns for a specific period. The JDR relied on a Tribunal order in a similar case. 2. The Authorized Representative for the respondent explained that there was no intention to evade service tax, as the levy was under judicial review. Due to financial hardship and lack of provision in their contracts, there was a delay in compliance. The respondent eventually complied, paid the penalty, and discharged their tax liability voluntarily. The representative requested leniency considering the circumstances. 3. After hearing both sides and examining the records, it was noted that the respondent acknowledged their service tax liability and complied with the law belatedly due to non-realization of tax from clients. There was no evidence of fraud or deliberate breach of law. The respondent's conduct indicated a fair intention to comply, although there were delays in filing returns for certain periods. 4. Considering the nature of the firm as a professional one, imposing a penalty would still be a hardship. The absence of evidence showing an intention to evade payment led to the conclusion that imposing a penalty would be unreasonable. The provision of section 80 allows for considering reasonable cause before penalty imposition, and in this case, there was no proof of evasion. 5. The appeal of the revenue was dismissed, modifying the first appeal order to reflect the considerations discussed above.
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