2008 (1) TMI 88 - AT - Service Tax

Penalty on State Finance Corporation providing loans to the small industrial enterprises and enterprises carrying on other economic activities for starting, running, expanding and modernizing - On being pointed out, appellant discharged the entire Service Tax liability along with interest before the issuance of show cause notice - Considering the facts and circumstances of the case, provisions of Section 80 of the Finance Act can be invoked and penalty imposed is liable to be set aside

Summary

Issues:
- Appeal admission based on threshold limit
- Imposition of penalty under Section 76 read with Section 77 of the Finance Act, 1994
- Application of Section 80 of the Finance Act, 1994

Issue 1: Appeal Admission based on Threshold Limit
The appeal was listed for admission as the amount involved was below the threshold limit. The Member found that the appeal pertained to a Service Tax matter and noted that the 2nd proviso of Section 35B did not apply to Service Tax matters, leading to the admission of the appeal.

Issue 2: Imposition of Penalty under Section 76 read with Section 77 of the Finance Act, 1994
The appeal was against an order imposing a penalty under Section 76 read with Section 77 of the Finance Act, 1994. The Commissioner (Appeals) upheld the penalty, stating that the appellants failed to provide reasonable grounds to attract the provisions of Section 80 to prove a reasonable cause for their failure. The appellants, a State Finance Corporation, had provided loans to small industrial enterprises and other economic activities. Although they paid the entire Service Tax liability along with interest before the show cause notice was issued, the adjudicating authority imposed a penalty of Rs. 43,500 for a payment default of 435 days. However, the Member disagreed with this decision, stating that since the Service Tax liability was accepted and paid before the notice, the imposition of a penalty was not justified.

Issue 3: Application of Section 80 of the Finance Act, 1994
After considering the facts and circumstances, the Member invoked the provisions of Section 80 of the Finance Act, 1994. The Member concluded that the penalty imposed on the appellant should be set aside. Consequently, the impugned order was overturned, and the appeal was allowed.

This judgment highlights the importance of timely payment of tax liabilities and the application of relevant provisions of the Finance Act, 1994 to determine the imposition of penalties in Service Tax matters.