2007 (10) TMI 130 - AT - Service Tax

Sec. 80 Finance Act 1994 provides for dispensing with the penalties imposable under Sec. 76 77 78 and 79 if assessee prove reasonable cause for failure to comply with the relevant provisions bona fide belief - Comm(A) reducing the penalties imposed under Sec. 76 and 78 is justified.

Summary

Issues:
- Reduction of penalties imposed under Sections 76 and 78 of the Finance Act, 1994 by the Commissioner of Central Excise (Appeals).
- Applicability of penalties under Sections 76 and 78.
- Justification of penalties imposed by the original authority.
- Consideration of 'reasonable cause' for failure to comply with relevant provisions.
- Discretion in imposition of penalties based on facts and circumstances.

Analysis:

Reduction of Penalties under Sections 76 and 78:
The appeal filed by the Revenue challenges the reduction of penalties imposed under Sections 76 and 78 of the Finance Act, 1994 by the Commissioner (Appeals). The Revenue contends that the penalties should not have been reduced as per the provisions of the law. The Revenue relies on a decision of a single member of the Tribunal in a similar case where the minimum penalty prescribed under Section 76 was imposed due to a delay in payment of service tax. However, the respondents in the present case had paid the service tax due after being pointed out by the department. The Commissioner found that the penalties imposed by the original authority were not inconsistent with the law and that the reduction of penalties was justified based on the facts and circumstances of the case.

Applicability of Penalties under Sections 76 and 78:
The Commissioner affirmed the demand of service tax and interest as the respondents had contravened provisions related to registration, filing of returns, and payment of service tax. The respondents argued that they were sub-contractors and contended that the services provided were part of maintenance services rendered by their clients. However, the Commissioner concluded that the appellants alone had provided security services and confirmed the demand of service tax and interest. The Commissioner considered the plea of the assessee regarding their lack of awareness of statutory provisions but followed previous Tribunal decisions that allowed for discretion in imposing penalties based on the circumstances of each case.

Justification of Penalties Imposed by Original Authority:
The original authority had imposed penalties under Sections 76 and 78 of the Finance Act, 1994. The penalty under Section 76 was imposed at Rs. 10,000, while the tax due was Rs. 1,19,511. The Commissioner found that the penalties imposed were not inconsistent with the law and that there was no intentional evasion of service tax by the respondents. The Commissioner's order reducing the penalties was deemed justified based on the facts of the case and the discretion allowed in penalty imposition as per previous Tribunal decisions.

Consideration of 'Reasonable Cause' for Non-Compliance:
Section 80 of the Finance Act, 1994 provides for dispensing with penalties if the assessee proves a 'reasonable cause' for non-compliance with relevant provisions. In this case, the Commissioner found that the reduction of penalties under Sections 76 and 78 was justified as the appellant had a bona fide belief that they were not liable to pay the tax. The appeal was dismissed as the Revenue's challenge lacked merit.

Discretion in Imposition of Penalties:
The Tribunal emphasized the discretion inbuilt in the relevant provisions for the imposition of penalties, allowing for penalties to be reduced depending on the facts and circumstances of each case. The Tribunal upheld the Commissioner's decision to reduce the penalties under Sections 76 and 78 based on the findings that there was no intentional evasion of service tax and that the penalties imposed were not inconsistent with the law.

In conclusion, the Tribunal upheld the reduction of penalties under Sections 76 and 78 by the Commissioner of Central Excise (Appeals) and dismissed the Revenue's appeal, emphasizing the discretion in penalty imposition based on the circumstances of each case.