2011 (2) TMI 412 - AT - Service Tax

Demand - Manpower Recruitment Services - Penalty u/s 76 - Held that - Hon ble High Court has laid down the law that under Section 80 of Finance Act 1994 penalty can be either waived or imposed as per law but there is no provision to reduce it the appeal filed by the Revenue has to succeed. In this case the penalty was reduced from Rs.44, 600/- to Rs.10, 000/- but as per Section 76 of Finance Act 1994 penalty has to be either Rs.44, 600/- or Nil if it is considered that Bhawani had shown reasonable cause and therefore discretion to waive penalty could be exercised. - Since assessee has not filed any appeal decided in favor of revenue.

Summary

Issues:
1. Late payment of service tax and late filing of ST-3 returns.
2. Imposition of penalties under Sections 76 and 77 of the Finance Act, 1994.
3. Reduction of penalty by Commissioner (Appeals) invoking Section 80 of Finance Act, 1994.
4. Appeal by the Revenue before the Tribunal against the decision of Commissioner (Appeals).
5. High Court's observation on the authority's discretion to reduce penalties below the minimum prescribed limit.
6. Tribunal's reconsideration of the penalty reduction issue in light of the High Court's observation.

Analysis:
1. The case involved M/s. Bhawani Enterprises providing "Manpower Recruitment Services" facing delay in payment of service tax and late filing of ST-3 returns for specific periods. A show cause notice led to penalties of Rs.44,600 under Section 76 and Rs.1000 under Section 77 of the Finance Act, 1994.

2. Commissioner (Appeals) reduced the penalty under Section 76 to Rs.10,000 using Section 80 of the Finance Act, 1994. The Revenue appealed to the Tribunal against this decision, which was initially rejected based on a precedent decision.

3. The High Court intervened, setting aside the Tribunal's order and remanding the matter for fresh consideration. The High Court emphasized that the authority imposing the penalty cannot levy below the minimum prescribed limit, and the appellate authority or Tribunal cannot reduce penalties below the minimum prescribed.

4. The Tribunal, upon reconsideration, noted that the High Court's ruling clarified that penalties under Section 80 can be waived or imposed as per law, but there is no provision to reduce them. As Bhawani did not appeal and only the Revenue was challenging the penalty reduction, the Tribunal allowed the Revenue's appeal, restoring the penalties imposed by the original adjudicating authority and setting aside the Commissioner (Appeals) order.

5. The Tribunal's decision was based on the principle that the appellant, Revenue, cannot be put in a more disadvantageous position than per the Commissioner (Appeals) order, especially when Bhawani did not appeal. Therefore, the penalties were reinstated as per the original adjudicating authority's decision.

6. The Tribunal's final decision to set aside the Commissioner (Appeals) order and restore the penalties was in line with the High Court's observation on the authority's discretion regarding penalty reduction below the minimum prescribed limit.