2008 (8) TMI 92 - AT - Service Tax

Penalty for failure to pay tax - Commissioner in revision order hold that the, minimum amount of penalty under the provisions of Section 76 is Rs.100/- per day, as such, enhanced the penalty to Rs. 2,17,577/- - since service Tax liability and interest were discharged before the issuance of the SCN, order-in-revision enhancing the penalty imposed on the appellant is, unsustainable penalty should not be @ Rs. 100 per day

Summary

Issues:
1. Penalty enhancement under Section 76 of the Finance Act, 1994.
2. Discharge of service tax liability and interest before show cause notice issuance.
3. Applicability of penalty provisions and judicial decisions.
4. Discretion in imposing penalty under Sections 76 and 80 of the Finance Act, 1994.

Analysis:

Issue 1: Penalty Enhancement under Section 76
The appeal challenged the penalty enhancement under Section 76 of the Finance Act, 1994. The appellant had discharged the entire service tax liability and interest before the show cause notice was issued. The Ld. Commissioner enhanced the penalty to Rs. 2,17,577 based on the minimum penalty amount of Rs.100 per day under Section 76.

Issue 2: Discharge of Service Tax Liability Before Notice
The appellant contended that the penalty was already discharged along with the service tax liability and interest before the issuance of the show cause notice. Citing a Tribunal decision, the appellant argued against the penalty enhancement, emphasizing compliance before the notice.

Issue 3: Applicability of Judicial Decisions
The Ld. SDR argued that the penalty provisions under Section 76 were clear and referred to a Tribunal decision in ETA Engineering Ltd. v. Commissioner of Central Excise, Chennai. In response, the appellant cited the case of Digambar S. Govardhane v. Commissioner of C.Ex. Nashik, highlighting the settled law by the Tribunal.

Issue 4: Discretion in Imposing Penalty
The judgment discussed the discretion in imposing penalties under Sections 76 and 80 of the Finance Act, 1994. Referring to a High Court decision, it was noted that the Tribunal had the authority not to impose penalties. The appellant's plea of non-awareness of the provisions of the Finance Act 1994 was considered in the context of penalty imposition.

In conclusion, the Tribunal set aside the order-in-revision that enhanced the penalty, deeming it unsustainable. The appeal was allowed with consequential relief, emphasizing the discretionary nature of penalty imposition under the Finance Act, 1994, and the compliance of the appellant before the issuance of the show cause notice.