2010 (4) TMI 120 - AT - Service Tax

Reduction of penalty - Commissioner (Appeals) has reduced the penalty imposed on the respondents from double the amount to equal the amount of service tax involved in this case. Held that The Commissioner (Appeals) has reduced the penalty to Rs. 35, 700/- equal to the amount of service tax on the ground that the respondents had been already paid service tax amount under Section 78 of Finance Act 1994. Section 78 ibid provides for penalty which shall not be less than but which shall not exceed twice the amount of service tax not levied or paid etc The Tribunal in the case of CCE Bhopal vs. Rama Woodcraft (P) Ltd. reported in (2008 -TMI - 30165 - CESTAT NEW DELHI) held that even where a minimum penalty is prescribed the authority has discretion to impose a lesser penalty. The penalty imposed in the case is not less than the Service Tax involved in the case.-order of commissioner (appeals) upheld.

Summary

Issues:
Reduction of penalty from double the amount to equal the amount of service tax involved.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the reduction of penalty from double the amount to equal the amount of service tax involved. The respondents, engaged in providing service as Mandap Keeper, were alleged to have suppressed the taxable value, leading to the confirmation of demand and imposition of penalty by the lower authorities. The Commissioner (Appeals) reduced the penalty to equal the amount of service tax, prompting the revenue to appeal.

The appellant contended that the respondents had suppressed and concealed the quantum of service tax, justifying the imposition of penalty under Section 78 of the Finance Act, 1994, which could not be less than but not more than twice the amount of service tax. Both adjudicating authorities found that the respondents had indeed suppressed the value of taxable service, resulting in the confirmation of the service tax demand.

The lower adjudicating authority initially imposed a penalty of double the amount of service tax, which was later reduced by the Commissioner (Appeals) to an amount equal to the service tax paid by the respondents. The Tribunal referred to a previous case law where it was held that even when a minimum penalty is prescribed, the authority has the discretion to impose a lesser penalty. In this case, the penalty imposed was not less than the service tax involved, aligning with the provisions of Section 78 of the Finance Act, 1994.

Consequently, the Tribunal found no infirmity in the order passed by the Commissioner (Appeals) and upheld the Order-in-Appeal, dismissing the appeal brought by the revenue. The judgment provides clarity on the discretion of authorities in imposing penalties within the framework of relevant legal provisions.

This detailed analysis highlights the key arguments, findings, and legal principles involved in the judgment, addressing the issue of penalty reduction and the application of Section 78 of the Finance Act, 1994 in the context of the case.