2011 (4) TMI 916 - AT - Service Tax

Reduction in the penalty as per Section 78 of the Finance Act, 1994 - Held that - Commissioner (Appeals) has reduced the tax amount and hence the respondents cannot take advantage of the provision under the fourth proviso to Section 78. Having not paid the penalty amount within one month from the date of the Order-in-Original even though the legal provision was clearly brought to the notice of the respondents the respondents cannot be given the benefit of paying 25% of the reduced penalty. Thus the respondents are required to pay penalty of Rs.40,692/- equal to the reduced tax amount determined by the lower appellate authority - in favour of revenue.

Summary

Issues involved: Reduction in penalty by lower appellate authority, non-confirmation of additional duty demand for the period prior to 19.4.2006.

Analysis:
The judgment by the Appellate Tribunal CESTAT, CHENNAI, addressed two main issues. Firstly, the Department's appeal focused on the reduction in penalty by the lower appellate authority and the non-confirmation of additional duty demand for the period before 19.4.2006. The Tribunal noted that the Department did not challenge the non-confirmation of the additional duty demand in their appeal, which limited the Tribunal's scope to address this issue.

Regarding the reduction in penalty, the Tribunal analyzed the provisions of Section 78 of the Finance Act, 1994. The original authority had specified that if the tax amount, interest, and penalty were paid within 30 days, the penalty would be reduced to 25%. However, the Tribunal observed that the respondents failed to deposit 25% of the penalty amount within one month of the original order, as required. The Tribunal highlighted that the provision for reduced penalty of 25% within 30 days of the Commissioner (Appeals) order applies when the tax amount is enhanced, not reduced. In this case, since the Commissioner (Appeals) reduced the tax amount, the respondents were not eligible for the reduced penalty under the fourth proviso to Section 78. Consequently, the Tribunal modified the lower appellate authority's order, holding the respondents liable to pay a penalty of Rs.40,692, equal to the reduced tax amount determined by the lower appellate authority. The Department's appeal was allowed based on these findings.

In conclusion, the judgment provided a detailed analysis of the issues related to the reduction in penalty by the lower appellate authority and the non-confirmation of additional duty demand. The Tribunal interpreted the relevant provisions of the Finance Act, 1994, to determine the respondents' liability for penalty payment based on the specific circumstances of the case.