2011 (5) TMI 421 - AT - Service Tax

Penalty - Revisional order - There is no doubt that when the authority noticed that the appellants failed to seek registration, penalty was imposable. It has been enlightened to us in the course of hearing that penalty imposable under section 75A no more remains in the statute book from 10.9.05 - Consequently, penalty levied under section 76 and 78 of Finance Act, 1994 invites consideration under section 80 of the Finance Act 1994 - On an overall appreciation of the fact on record and in absence of any reason recording malafide intention of the appellants, and that too when levy of service tax was in confusion at the inception, it would not be proper to mechanically confirm penalties imposed under section 76 & 78 of the Finance Act 1994 Failure to file the return has certainly caused prejudice to the interest of Revenue depriving the Revenue from the scope of scrutiny of the affairs of the appellants - Finding that the order has not demonstrated the reasoning for imposition of penalty under section 77 of the Finance Act, 1994 it suffers from legal infirmity - Appeals are allowed partly

Summary

Issues:
Revisional order imposing penalties under sections 75A, 76, 77, and 78 of the Finance Act 1994 without proper application of law and reasoning.

Analysis:
The appellants challenged the Revisional Order that levied penalties under various sections of the Finance Act 1994. The counsel for the appellants argued that the penalties were imposed without proper justification and requested to set aside the Revisional Order in all nine cases. On the other hand, the Departmental Representative contended that Revisionary power must be exercised when adjudication orders did not impose penalties. The Tribunal examined the records and found that penalties were justified under section 75A at the relevant time, even though the section was later deleted. However, regarding penalties under sections 76 and 78, the Tribunal found no evidence of deliberate attempts to evade liability. The Tribunal emphasized that penalties under these sections, especially on small taxpayers, should not be imposed without proving mens rea. Therefore, penalties under sections 76 and 78 were considered under section 80 and set aside due to lack of evidence of prejudicial actions against the Revenue.

The Tribunal also addressed the penalty under section 77 for failure to file returns. While acknowledging that failure to file returns prejudiced the Revenue, the Tribunal noted that the appellants rectified the situation by paying taxes and filing revised returns. However, the order lacked reasoning for imposing penalties under section 77, leading to a legal infirmity. Consequently, the penalty under section 77 was set aside. Overall, the appeals were partly allowed based on the specific analysis of penalties under different sections of the Finance Act 1994.

The Tribunal clarified that the decision in this case should not be considered a precedent due to the unique circumstances involved. The judgment highlighted the importance of proper application of law, examination of evidence, and justification for imposing penalties under different sections of the Finance Act 1994.