2008 (6) TMI 26 - AT - Service Tax

Whether the quanta of penalties imposed on the respondent by the lower appellate authority under sections 76 and 78 of the Finance Act, 1994 are liable to be enhanced as pleaded by the Revenue revenue plea that penalty under Section 76 below the mandatory minimum prescribed cannot be imposed, is acceptable but reduction of penalty u/s 78 is justified because there is not intention to evade the duty

Summary

Issues:
1. Enhancement of penalties under sections 76 and 78 of the Finance Act, 1994.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Chennai, dealt with the issue of whether the penalties imposed on the respondent under sections 76 and 78 of the Finance Act, 1994 should be enhanced. The respondent did not appear despite notice, while the appellant was represented by the SDR. The Tribunal considered the argument that it has no power to reduce the penalty below the mandatory minimum, citing a judgment of the Rajasthan High Court. The Tribunal accepted this argument and maintained the penalty of Rs. 100 per day of default as imposed by the original authority under section 76. Regarding the penalty under section 78, the Tribunal noted that the appellant's argument about the service provider's lack of intention to evade tax was not challenged. As there was no appeal against the penalty imposed by the Commissioner (Appeals), the Tribunal did not vacate the penalty, thus maintaining the reduced penalty of Rs. 5,000 imposed by the lower appellate authority under section 78.

In conclusion, the Tribunal set aside the reduction of penalty under section 76 and maintained the reduced penalty under section 78. The impugned order was modified accordingly, and the appeal was disposed of. The judgment highlighted the importance of legal precedents in determining the appropriate penalties under the Finance Act, 1994 and emphasized the need for parties to challenge penalties through the proper appellate procedures to seek modifications or vacating of penalties imposed.