2009 (8) TMI 360 - AT - Service Tax

Penalty-reasonable cause- The assessee was engaged in providing services of technical testing and inspection. It had paid service tax with interest. However, the adjudicating authority imposed penalties under section 76 and 77 upon the assessee. On appeal, the Commissioner (Appeals) upheld the action of the adjudicating authority. In the instant appeal, the assessee submitted that during the disputed period section 76 provide for penalty of ₹ 100 per day only but in this case penalty imposed ₹ 200 per day which was introduced subsequently. - under section 77 there was no provision for imposition of penalty for filing the late return which was introduced later. The assessee also submitted that the late payment occurred because it wanted to pay service tax out of Cenvat Credit but was not possible, thus the assessee sought lenient view as per section 80. Held that remand back the matter for considering the amendment and lenient view.

Summary

Issues:
1. Imposition of penalty under section 76 and section 77 of Finance Act, 1994.
2. Applicability of penalty rates before and after amendments.
3. Request for lenient view under section 80 of the Finance Act, 1994.
4. Ignorance of law as an excuse for contravention of legal provisions.

Analysis:
1. The appellants were penalized under section 76 and section 77 of the Finance Act, 1994 for delayed payment and filing of returns related to technical tests and inspection services. The service tax liability was paid with interest, and the penalty was the subject of dispute.

2. The advocate for the appellants argued that the penalties were imposed at higher rates than those applicable during the period of delayed payment. He highlighted that the amendments introducing higher penalty rates were made after the penalties were imposed on the appellants. Additionally, he pointed out that section 77 did not initially provide for penalties related to late return filing, which was introduced later.

3. The appellants sought a lenient view under section 80 of the Finance Act, 1994, citing that the delayed payment was due to their intention to pay the service tax from Cenvat credit, a method they were advised against by the Revenue. The Departmental Representative opposed this request, emphasizing that the grounds for amendment of the law and leniency under section 80 were not raised before the lower authorities.

4. The Tribunal acknowledged that the grounds for leniency and the impact of amendments to sections 76 and 77 were not presented before the lower authorities. However, considering the subsequent amendments and the circumstances of the case, the Tribunal found merit in the appellants' arguments. Consequently, the Tribunal allowed the stay petition against penalty recovery, remanded the matter to the Original Adjudicating Authority for fresh consideration, and directed the consideration of the appellants' claim for lenient view under section 80. The Tribunal emphasized that ignorance of the law cannot serve as an excuse for non-compliance with legal provisions, but decided to give the appellants an opportunity to present their case before the Adjudicating Authority.