2010 (12) TMI 324 - HC - Service Tax

Penalty - The assessee had already paid the service tax amount alongwith interest before completion of the adjudication process and request was made for taking a lenient view as regards penalty - Held that - The impugned order indicates that the total amount of duty liability involved is Rs. 70,000/- over a period of almost five years - considering the findings of fact recorded by the Tribunal and considering the smallness of amount involved, waiver of penalty u/s 80 upheld.

Summary

Issues:
Challenge to order under Section 35G of the Central Excise Act, 1944 regarding reasonable cause for non-payment of service tax and penalties.

Analysis:

Issue 1: Challenge to Tribunal's Decision
The Commissioner of Central Excise challenged the Tribunal's order under Section 35G of the Central Excise Act, 1944, questioning the extension of benefits under Section 80 of the Finance Act, 1994 to the respondent. The primary contention was the lack of reasonable cause for non-payment of service tax and penalties by the respondent.

Issue 2: Background and Proceedings
The respondent, a proprietary firm engaged in clearing and forwarding services, faced a search leading to a show-cause notice. The adjudicating authority confirmed a service tax liability of Rs. 69,038 under Section 73(1)(a) of the Finance Act, 1994, with interest and penalties under various sections. Unsuccessful appeals led the matter to the Tribunal, which set aside the penalties and granted relief to the assessee.

Issue 3: Appellant's Arguments
The Senior Standing Counsel for the appellant contested the Tribunal's decision, emphasizing the absence of a reasonable cause for non-payment of service tax by the respondent. The appellant argued that the Tribunal erred in extending the benefit of Section 80 of the Act without sufficient justification in the case's circumstances.

Issue 4: Tribunal's Rationale
During the proceedings, the respondent contended that they had paid the duty amount with interest before the adjudication completion and requested leniency regarding penalties. The Tribunal considered the respondent's cooperation, payment of service tax, and the firm's small size, deeming a lenient view appropriate. It found a reasonable cause for invoking Section 80 of the Act based on these factors.

Issue 5: Tribunal's Findings and Conclusion
The Tribunal noted the duty liability of Rs. 70,000 over nearly five years and the firm's small scale. Considering these aspects, the Tribunal's decision was deemed reasonable, given the circumstances and the respondent's actions. The Court found no grounds for interference, as the Tribunal's approach was justified.

Conclusion:
As no substantial question of law was present, the appeal was dismissed, upholding the Tribunal's decision to extend the benefit of Section 80 of the Finance Act, 1994 to the respondent due to the reasonable cause shown for non-payment of service tax and penalties.