2011 (7) TMI 127 - AT - Central Excise

Penalty u/s 76 and 77 - Provision of section 80 - Maintenance and repair services - Service tax with interest was paid by the respondents even before issue of show cause notice but unfortunately while paying the amount the interest of Rs. 118/- was short paid. Because of this reason the provisions of Section 73 (3) cannot be applied since entire amount with interest has not been paid and if the entire amount has not been paid proceedings can be initiated according to the law - Once delay in payment is established and show cause notice has been issued penalty under Section 76 as per the amount prescribed in the Section have to be imposed unless respondent is able to show reasonable cause for non payment of service tax or delay in payment and if Section 80 of Finance Act 1994 is not invokable penalty becomes imposable - Hence at no stage during the course of proceedings before the adjudicating authority or appellate authority or before the Tribunal when the matter was heard in 2009 the respondents have pleaded the invocation of provisions of Section 80 of Finance Act 1994 - Thus it would not be appropriate to invoke the provisions of Section 80 at this stage - Appeal filed by the Revenue is thus allowed.

Summary

Issues:
1. Reduction of penalty under Section 76 of Finance Act, 1994.
2. Applicability of Section 80 of Finance Act, 1994.
3. Invocation of legal provisions in case of delayed payment of service tax.

Analysis:

1. The case involved a dispute regarding the reduction of penalty under Section 76 of the Finance Act, 1994, imposed on a company providing maintenance and repair services. The company had paid the service tax late for certain quarters and did not file returns on time, leading to penalty proceedings. The Commissioner initially reduced the penalty, but the Tribunal rejected the appeal filed by the Revenue. However, the Hon'ble Gujarat High Court set aside the Tribunal's order and directed a fresh decision based on the judgment in the case of CCE vs. Port Officers.

2. The Tribunal, in light of the High Court's direction, considered the applicability of Section 80 of the Finance Act, 1994, which allows for the reduction of penalty to zero or imposition as per the law. It was noted that the company had paid the service tax with interest before the show cause notice was issued, but there was a shortfall in interest payment. As per Section 73(3), if the entire amount with interest is not paid, proceedings can be initiated. The Tribunal emphasized that the company did not invoke Section 80 at any stage of the proceedings, leading to the restoration of the penalty under Section 76.

3. The Tribunal concluded that since the company failed to establish a reasonable cause for the delay in payment and did not invoke Section 80 of the Finance Act, 1994, the penalty under Section 76 was restored and enhanced from Rs. 41,000 to Rs. 1,30,860. The Revenue's appeal was allowed, and the cross objection filed by the company was disposed of accordingly.

This detailed analysis highlights the key legal issues addressed in the judgment, including the interpretation of statutory provisions, the application of precedents, and the determination of penalties in cases of delayed payment of service tax.