2024 (6) TMI 1116 - HC - Service Tax

Levy of penalty - Respondent had discharged the Service Tax Liability and even paid the interest thereon before issuance of SCN - HELD THAT - It is well settled principle that an Appellate Court ought not to interfere with exercise of discretion except where such exercise has been shown to be arbitrary, capricious or perverse. Further, the Appellate Court ought not to reassess the material and seek to reach a different conclusion from the one reached by the Tribunal if one reached by the Tribunal was reasonably possible on the material - If the discretion exercised by the Tribunal is reasonable and in a judicial manner, the fact that the Appellate Court would have taken a different view may not justify interference with the Tribunal's exercise of discretion. Once it is a discretion to be exercised there can be no substantial questions of law arising thereof. Tribunal has given reasons in the impugned order why imposition of penalty is not merited. There are no perversity in the exercise of discretion - there are no substantial questions of law arising - appeal dismissed.

Issues:
1. Imposition of penalties on M/s Serene Developers.
2. Applicability of provisions of Sub-Section (3) of Section 73 of the Finance Act 1994.
3. Relationship between penalty imposition under Section 77 (2) and payment of duty.
4. Setting aside penalty under Section 78 of the Finance Act 1994.
5. Ignorance of provisions of law as a ground for setting aside penalty.
6. Reliance on specific judgments by the CESTAT.
7. Appreciation of the judgment of the Hon'ble Supreme Court in a related case.

Analysis:
1. The primary issue in this case revolved around the imposition of penalties on M/s Serene Developers. The Hon'ble CESTAT set aside the penalties imposed, leading to the appeal. The Tribunal considered that the Respondent had discharged the Service Tax Liability and paid the interest before the show cause notice was issued.

2. The second issue questioned the applicability of the provisions of Sub-Section (3) of Section 73 of the Finance Act 1994. The Tribunal's decision was based on the argument that the Respondent had paid the tax liability along with interest before the show cause notice, which influenced the outcome.

3. The relationship between penalty imposition under Section 77 (2) and the payment of duty was also examined. The Tribunal exercised discretion and set aside the part of the order imposing penalties, considering the circumstances where the tax was paid late due to the assessee's ignorance.

4. Another issue focused on setting aside the penalty under Section 78 of the Finance Act 1994 without recourse to the provisions of the erstwhile Section 80. The Tribunal's decision was based on the reasoning that the assessee's ignorance of the law should not warrant a substantial penalty.

5. The aspect of ignorance of provisions of law as a ground for setting aside the penalty under Section 78 was deliberated. The Tribunal's exercise of discretion in setting aside the penalty was found to be reasonable, with no perversity observed in the decision-making process.

6. The CESTAT's reliance on specific judgments, such as the one dated 08.09.2021 in the case of C.C.E & S.T. LTU Bangalore vs. Adecco flexion workplace Solution Ltd., was also questioned. The relevance and applicability of such judgments in the present case were debated.

7. Lastly, the appreciation of the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Rajasthan Spinning & Weaving Mills, 2009 (238) E.L.T. (S.C.), was examined. The Tribunal's understanding and application of this judgment were scrutinized in the context of the present case.

In conclusion, the High Court dismissed the appeal, stating that no substantial questions of law arose from the Tribunal's decision. The Court emphasized the principle that appellate courts should not interfere with the exercise of discretion unless it is shown to be arbitrary, capricious, or perverse. The Tribunal's reasoning for setting aside the penalty was considered reasonable and judicial, leading to the dismissal of the appeal.

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