2010 (1) TMI 606 - AT - Service Tax

Penalty Suppression of value of taxable service commissioner impose penalty under section 76 and 78 - no further evidence which has been produced to prove collusion or fraud to attract sections 76 and 78 and at the same time, the provisions of section 80 of the Finance Act, 1994 can be invoked in this case, for non-imposition of penalty under sections 76 and 78 Appeal allowed What is reasonable cause? The Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh - (1978 -TMI - 39996 - SUPREME Court) held that - it is well-settled law that reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence acting under normal circumstances without negligence or inaction or want of bona fide.

Summary

Issues involved:
Revision of Order-in-Original regarding service tax liability and penalties under sections 76, 78, and 77.

Analysis:
The case involved a revision of an Order-in-Original related to service tax liability and penalties under sections 76, 78, and 77. The appellant did not challenge the penalty under section 77 but contested the penalties proposed under sections 76 and 78. The revisionary authority modified the original order and imposed penalties on the appellant. The appellant argued that the issue was settled by previous judgments. The Departmental Representative supported the revision, citing the appellant's admission of non-payment of service tax as evidence of intent to evade tax. However, the appellate judge found that the revisionary authority did not provide findings on how the appellant suppressed details of taxable services. The judge noted that the appellant had paid the service tax along with interest, and the adjudicating authority did not impose penalties under sections 76 and 78 based on these facts. The judge referred to previous cases where penalties were waived for voluntary compliance and lack of intent to evade payment.

The judge highlighted the importance of reasonable cause in penalty imposition, citing legal precedents. The judge criticized the revisionary authority for imposing a substantial penalty disproportionate to the tax amount short paid. The judge emphasized that penalties should be commensurate with the offense and noted instances where penalties were waived due to genuine doubts in tax interpretation. The judge also referenced a High Court judgment emphasizing the need for evidence of fraud or collusion to impose penalties under sections 76 and 78. In the absence of such evidence, the judge invoked section 80 of the Finance Act, 1994, to set aside the impugned order and allowed the appeal.