2004 (3) TMI 170 - AT - Central Excise

Summary

Issues: Penalty enhancement under Section 77 of the Finance Act, 1994; Applicability of Section 80 of the Finance Act; Discretion of assessing authority in imposing penalties.

Penalty Enhancement under Section 77 of the Finance Act, 1994:
The appellant filed an appeal against an order-in-appeal where the penalty of Rs. 45,400/- was increased to Rs. 1,27,300/- by the Commissioner (Appeals-II), Central Excise and Customs, Jaipur. The Commissioner enhanced the penalty considering the provisions of Section 77 of the Finance Act. However, the appellant argued that being a new levy, they were unaware of the service tax provisions, leading to delayed filing of returns. The Tribunal referred to Section 80 of the Finance Act, which states that no penalty shall be imposed if the assessee proves a reasonable cause for the failure. Citing the decision in the case of Escorts JCB Ltd. v. CCE, New Delhi, the Tribunal held that the assessing authority has discretion to impose a lesser penalty amount when a mandatory penalty equal to the demand is prescribed.

Applicability of Section 80 of the Finance Act:
Section 80 of the Finance Act provides relief from penalties if the assessee can establish a reasonable cause for the failure. In this case, the appellant argued that their lack of awareness about service tax provisions justified the delayed filing of returns. The Tribunal, considering the provision under Section 80, held that penalties under Section 77 can be waived if the delay is explained. The Tribunal's decision was influenced by the precedent set in the case of Escorts JCB (Supra), emphasizing the discretionary power of the assessing authority to impose a reduced penalty amount when an equal penalty to the demand is prescribed.

Discretion of Assessing Authority in Imposing Penalties:
The assessing authority imposed a penalty of Rs. 45,400/- under Section 77 of the Finance Act for late filing of service tax returns. However, the Tribunal, in line with Section 80 of the Finance Act and the precedent in the case of Escorts JCB (Supra), emphasized that penalties can be waived if the delay is justified. The Tribunal set aside the impugned order and allowed the appeal, highlighting the assessing authority's discretion to impose a lesser penalty amount when an equal penalty to the demand is mandated.