2015 (9) TMI 985 - HC - Service Tax

Penalty u/s 76 & 78 - Benefit of Section 80 - waiver of penalty u/s 78 was allowed but waiver of penalty u/s 76 was refused by the tribunal - Held that - Section 80 opens with a non-obstante clause saying that notwithstanding anything contained in Section 76, Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure. - words or Section 78 were introduced into Section 80 by the Finance Act of 2004, to exclude Section 79 from the net of Section 80. Therefore, once the assessee proves that there was reasonable cause for the failure. Section 80 starts to operate, insulating the imposition of any other penalties under Section 76, Section 77 or Section 78 of the Act. Insofar as the appellant is concerned, this is inexcusably applicable in law - appeal is eligible to succeed. - Decided in favour of assessee.

Summary

Issues: Interpretation of Section 80 of the Finance Act, 1994 regarding imposition of penalties under Sections 76, 77, and 78 in a service tax case.

Analysis:
- The Tribunal initially held that the appellant was entitled to the benefit of Section 80 of the Finance Act, 1994, due to the circumstances of the case. However, the final order set aside only the penalties imposed under Section 78, not mentioning the penalty under Section 76. The appellant requested a rectification, clarifying that both penalties should be vacated. The Tribunal then confirmed that only the penalty under Section 78 was vacated, citing a clerical error in the use of the word "penalties" in plural.

- Section 80 of the Act is crucial in this case as it provides a safeguard against penalties under Sections 76, 77, and 78 if the assessee proves a reasonable cause for the failure. The amendment in 2004 added Section 78 to Section 80, excluding Section 79. Once reasonable cause is established, Section 80 prevents the imposition of penalties under Sections 76, 77, or 78. The Tribunal's findings support the appellant's eligibility for the benefit of Section 80, making the appeal successful.

- The judgment concludes by allowing the appeal and setting aside the orders that did not extend the benefit of Section 80 to the penalty imposed under Section 76. Consequently, the penalty under Section 76 imposed on the appellant by the authorities is vacated, with no additional costs incurred.