2007 (8) TMI 337 - AT - Service Tax

Section 80 read with section 76 waiver of penalty held that - section 80 of the Finance Act, 1994 which provides that Notwithstanding anything contained in the provisions of sections 76, 77, 78 and 79, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was, reasonable cause for the said failure - on consideration of sections 76 and 80, there is discretion in the authority of not imposing penalty penalty under section 76 reduced to Rs. 1,00,000 (Rupees one lakh only). However, the penalty under section 77 is upheld

Summary

Issues:
Challenge of penalty under section 76 and 77 of the Finance Act, 1994 for late payment of service tax and non-submission of S.T. 3 return.

Analysis:

1. Challenge of Penalty under Section 76 and 77:
The appellants contested the penalty of Rs. 2,32,253 under section 76 and Rs. 8,000 under section 77 of the Finance Act, 1994 for late payment of service tax and non-submission of S.T. 3 return. The Tribunal referred to the case of D.R. Gade v. CC [2006] 4 STT 223 (Mum.-CESTAT) where it was highlighted that section 80 of the Finance Act, 1994 allows for no penalty imposition if the assessee proves a reasonable cause for the failure. The Tribunal considered the fact that the interest amount paid was a significant portion of the Service Tax, neutralizing any pecuniary advantage gained by the appellant. The revenue challenged this decision in the Hon'ble Bombay High Court, which acknowledged that the reduction in penalty was a discretionary exercise based on factual findings. The High Court emphasized the discretion in the authority of not imposing penalties under sections 76 and 80. Following this precedent, the Tribunal reduced the penalty under section 76 to Rs. 1,00,000 based on the appellants' plea regarding the delay caused by the process being taken over by a foreign company in Japan. However, the penalty under section 77 was upheld, resulting in a partial allowance of the appeal.

2. Conclusion:
The Tribunal's decision to reduce the penalty under section 76 while upholding the penalty under section 77 showcases the application of legal provisions and precedents to determine penalties for late payment of service tax and non-submission of returns. The case highlights the importance of proving reasonable cause for failures to avoid penalties and the discretionary powers vested in authorities to impose or reduce penalties based on individual circumstances. The judgment underscores the significance of factual findings and legal interpretations in determining the appropriate penalties under the Finance Act, 1994.