2008 (7) TMI 162 - AT - Service Tax

Revenue submits that the non-imposition of penalty under Section 76 by the Original Authority was not justified - appellants were under the impression that the Service tax was paid by the sub-agents - Original Authority has exercised his powers reasonably u/s 80 and has seen the bona fide action on the part of the assessee in belated deposit of service tax - appeal of assessee is allowed

Summary

Issues:
1. Imposition of penalty under Section 76 and Section 78 of the Finance Act.
2. Authority of Assistant Commissioner to grant relief in terms of penalty imposition.
3. Justification of dropping penalty under Section 76 by the Original Authority.
4. Applicability of previous judgments in similar circumstances.

Analysis:
1. The appeal arose from an Order-in-Revision imposing penalty under Section 76 and enhancing it under Section 78 of the Finance Act. The Appellant argued that the Assistant Commissioner had the power to drop penalties under Section 80 if a bona fide reason was shown for non-imposition of penalty. The Commissioner was justified in dropping the penalty under Section 76 and imposing a lesser penalty under Section 78 due to the circumstances explained by the Appellant. The Revisional Authority's decision to enhance the penalty was challenged.

2. The Counsel referred to a Tribunal's decision in Majestic Mobikes case and a High Court judgment in CCE, Bangalore v. Sunitha Shetty, emphasizing that if the Original Authority found bona fides on the part of the assessee regarding deposits, the Revisional Authority should not enhance or impose penalties. These precedents supported the argument against the enhancement of penalties by the Revisional Authority.

3. The Respondent argued that the non-imposition of penalty under Section 76 by the Original Authority was unjustified. The Respondent relied on a judgment by the High Court of Karnataka in the case of CCE & STC, Bangalore v. First Flight Couriers Ltd., which set aside the Tribunal's order dropping the penalty. However, the Tribunal distinguished this case from the present one, highlighting the reasonable cause for belated deposit of service tax by the assessee.

4. The Tribunal considered the previous judgments cited by both parties. It noted that the High Court's decision in CCE v. Sunita Shetty and the Tribunal's decision in Majestic Mobikes Pvt. Ltd. supported the Appellant's argument that the penalties should not have been enhanced by the Revisional Authority. The Tribunal, therefore, set aside the impugned order and allowed the appeal based on the reasoning provided in these judgments, emphasizing the reasonable exercise of powers by the Original Authority in this case.