2010 (1) TMI 325 - AT - Service Tax

Penalty- Show-cause notice under Section 74 was issued proposing modification of the Order-in-Original by revising the penalty imposed under Section 76 which was calculated at the rate of Rs. 100/- to Rs. 200/- per week instead of Rs. 100/- per day. The notice also proposed imposition of penalty under Section 78. A fresh adjudication order was passed enhancing the penalty to Rs. 6,12,894/- @ Rs. 100/- for every day during the period of delay in payment of tax and dropping proceedings for imposition of penalty under Section 78. The Commissioner (Appeals) set aside the enhancement of penalty on the ground that it cannot be said that the imposition of penalty of Rs. 57,200/- was an error apparent on the face of the record requiring correction/rectification under Section 74; hence this appeal by the Revenue. Held that- The Revenue seeks to contend that in any event the penalty cannot be less than Rs. 100/- per day as per the statutory provision of Section 76. However, this does not amount to a mistake apparent on the record requiring rectification under Section 74 and if the Revenue was aggrieved by the imposition of the penalty of Rs. 57,200/-, the proper course to have been followed was to issue notice for revision in terms of Section 84 of the Finance Act, 1994 and proceed to pass fresh orders in revision. Thus, uphold the impugned order and reject the appeal.

Issues:
1. Penalty imposed under Section 76 for belated payment of service tax.
2. Proposal for modification of penalty under Section 76.
3. Enhancement of penalty in the adjudication order.
4. Commissioner (Appeals) decision on penalty enhancement.
5. Appeal by the Revenue challenging the Commissioner's decision.

Analysis:

1. The initial Order-in-Original demanded service tax with interest and imposed a penalty of Rs. 57,200 under Section 76 for belated payment of tax from 1-9-1999 to 30-9-2002. Subsequently, a show-cause notice was issued proposing modification of the penalty calculation from Rs. 100 per day to Rs. 200 per week under Section 74. A fresh adjudication order was passed enhancing the penalty to Rs. 6,12,894 at the rate of Rs. 100 per day for the delay in tax payment, while dropping proceedings for penalty under Section 78.

2. The Revenue contended that the penalty should not be less than Rs. 100 per day as per the statutory provision of Section 76. However, the Tribunal found that the penalty of Rs. 57,200 was not based on Rs. 100 per week, as the actual number of weeks of delay was 160, resulting in a potential penalty of Rs. 16,000. The Tribunal clarified that this discrepancy did not constitute a mistake apparent on the record for rectification under Section 74.

3. The Tribunal held that if the Revenue was dissatisfied with the penalty imposed, the correct procedure would have been to initiate a revision under Section 84 of the Finance Act, 1994, rather than seeking rectification under Section 74. The Tribunal emphasized that the imposition of penalty at a lower rate than Rs. 100 per day did not warrant rectification under Section 74.

4. Considering the above discussion, the Tribunal upheld the impugned order and dismissed the appeal by the Revenue. The Commissioner (Appeals) decision to set aside the penalty enhancement was affirmed, as it was not deemed an error apparent on the face of the record necessitating correction under Section 74.

This detailed analysis of the judgment highlights the issues surrounding the penalty imposition, modification proposals, penalty enhancement, and the legal reasoning behind the Tribunal's decision to reject the Revenue's appeal.

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