2007 (10) TMI 277 - HC - Service Tax

Reduction in the penalty challenged by revenue on ground that there is no provision under the Finance Act which enable Commissioner (A) to reduce the penalty levied by original authority - it is the responsibility of Appellate authority to reconsider the matter, to find out whether discretion vested with concerned officer to levy penalty used properly or not held that appellate Court can reduce penalty, even if provisions under Finance Act to reduce penalty are absent

Summary

Issues:
Challenge to order reducing penalty under Section 76 of the Central Excise Act.

Analysis:
The appeal was filed by the Commissioner of Central Excise, Mangalore challenging the order passed by the CESTAT, Bangalore in Appeal No. ST/26/2005. The appeal stemmed from a previous order by the Commissioner of Central Excise (Appeals), Mangalore, reducing the penalty imposed on the respondent from Rs. 31,710/- to Rs. 5,000/- under Section 76 of the Act. The Tribunal upheld the decision of the Commissioner of Central Excise (Appeals), leading to the current appeal before the High Court.

The main argument presented by the appellant was that there is no provision under the Finance Act, 1994 enabling the Commissioner to reduce the penalty levied by the original authority. The appellant contended that the Commissioner and the Tribunal erred in reducing the penalty without specific statutory authority to do so. The High Court, in response to this argument, examined the provision of Section 76 of the Finance Act, 1994.

Section 76(1)(b)(ii) of the Finance Act, 1994 grants the concerned Officer the discretion to levy a penalty not less than Rs. 100/- per day of failure, up to Rs. 200/- per day, with a maximum limit not exceeding the amount of service tax payable. The High Court opined that when discretion is provided to the officer, the Appellate Court can review whether such discretion was exercised judiciously. Although there is no explicit provision under Section 76 to reduce the penalty, the Appellate Court retains the power to do so if it finds that the discretion was not properly exercised by the Original Authority.

In conclusion, the High Court found no merit in the appeal and dismissed it, affirming the decision to reduce the penalty imposed on the respondent under Section 76 of the Finance Act, 1994. The judgment highlights the Appellate Court's authority to review the exercise of discretion by the Original Authority, even in the absence of a specific provision for penalty reduction under the relevant statute.