2009 (5) TMI 109 - AT - Service Tax

Quantum of penalty - penalty imposed under Section 76 is reduced in impugned order - I find that the provisions of Section 73 are not strictly applicable in as much as penalty to the extent of 25% was deposited by the assessee after the passing of the order of Commissioner (Appeals) and not after the order of the Original Adjudicating Authority. - Section 76 prescribed a minimum penalty with no option to the authorities to reduce the same. - Appellate authority should have invoked the provisions of Section 80 and set aside the penalty in its totality. As such I do not find any justifiable reason for the Revenue s grievance for reduction of penalty. The appellants have filed the cross objections, the same have to be treated as an appeal. However, the appellants have not agitated the quantum of penalty imposed by Commissioner (Appeals) in their cross objections and have not sought invocation of Section 80. As such penalty cannot be further reduced by invoking Section 80.

Summary

Issues: Appeal against reduction of penalty under Section 76 by Commissioner (Appeals) while confirming service tax, applicability of Section 73 for penalty reduction, invocation of Section 80 for setting aside penalty, and assessment of justifiability for penalty reduction.

Analysis:
1. The appeal was filed by the Revenue against the reduction of penalty under Section 76 by the Commissioner (Appeals) while confirming the service tax liability. The Commissioner reduced the penalty from Rs. 1,30,860 to Rs. 41,000 based on the appellant's payment of service tax with interest before the show cause notice was issued. The Commissioner cited various judgments where the CESTAT upheld waiver of penalty under Section 76 in similar cases. The Revenue contended that once Section 76 is invoked, the prescribed penalty must be imposed, suggesting that Section 80 could have been used if there was bona fide on the part of the assessee to set aside the penalty entirely.

2. The appellant argued that they deposited the service tax along with interest before the show cause notice and the reduced penalty was also paid within a month of the Commissioner (Appeals) order, invoking Section 73 which allows for a 25% reduction if the penalty is paid within one month. However, the Tribunal noted that Section 73 was not strictly applicable as the penalty was paid after the Commissioner (Appeals) order, not the Original Adjudicating Authority's order. The Tribunal agreed with the Revenue that Section 76 mandates a minimum penalty without the authority to reduce it. Despite this, the Commissioner's reasons for reducing the penalty were deemed justifiable, and the Revenue did not challenge these reasons in their appeal.

3. The Tribunal found no valid reason for the Revenue's grievance against the penalty reduction. The Tribunal suggested that if the appellate authority agreed with the reduction, Section 80 could have been invoked to set aside the penalty entirely. The appellants filed cross-objections, treated as an appeal, but did not contest the penalty amount or seek Section 80 invocation. Therefore, the penalty could not be further reduced under Section 80. Consequently, the Tribunal rejected the Revenue's appeal and disposed of the cross-objections, upholding the penalty amount set by the Commissioner (Appeals).

This detailed analysis highlights the key arguments, legal provisions, and decisions made by the Tribunal regarding the reduction of penalty under Section 76 in the case.