2007 (12) TMI 180 - AT - Service Tax

Commissioner reduced penalty by invoking section 80 delay in payment of tax commissioner is justified in recording a finding that the major delay relates to initial months, namely September and October, 2004 when banking and financial services were included in the service tax net with effect from 10-9-2004 but there was no reasonable cause for the delay after the initial period, therefore, some penalty was definitely required to be retained appeal partly allowed

Summary

Issues: Reduction of penalty for delay in payment of service tax, applicability of Section 80, grounds for enhancement of penalty, cross-objections for setting aside penalty.

In the judgment by the Appellate Tribunal CESTAT NEW DELHI, the issue revolved around the reduction of penalty imposed on the respondents for delay in payment of service tax. The Commissioner (Appeals) had reduced the penalty from Rs. 4,897 to Rs. 2000, citing Section 80 as the basis for the reduction. The Revenue appealed against this reduction, while the assessee appealed contending that no penalty should have been imposed at all. The Tribunal noted that the Commissioner had considered the initial months of September and October 2004 when banking and financial services were brought under the service tax net, finding a reasonable cause for the delay in payment. It was emphasized that Section 80 would prevail over Section 76 of the Finance Act, and as such, the Revenue's appeal for enhancement of the penalty was rejected, upholding the reduced penalty and dismissing the appeal.

Regarding the cross-objections raised by the respondents seeking to set aside the penalty entirely, the Tribunal found no merit in this argument. Despite acknowledging that the major delay occurred during the initial period of service tax levy on the respondents' services, it was noted that the delay persisted without any reasonable cause beyond the initial months. Consequently, the Tribunal concluded that some penalty was justified and needed to be retained. As a result, the cross-objections were dismissed. The judgment highlighted the importance of Section 80 in penalty imposition cases and the necessity of demonstrating a reasonable cause for any delay in payment of service tax to avoid penalties.