1998 (3) TMI 1 - AT - Service Tax

Service Tax Imposition of penalty for delayed filing of return Prologue of service tax No show cause notice

Summary

Issues:
- Imposition of penalty for delay in filing quarterly return under Section 77 of the Finance Act, 1994.
- Reduction of penalty by the Commissioner of Central Excise (Appeals) from Rs. 5,000 to Rs. 1,000.
- Appeal filed by Revenue against the reduction of penalty.
- Interpretation of Section 77 and Section 80 of the Finance Act, 1994.
- Consideration of reasonable cause for failure to file the return.

Analysis:

The case involved the imposition of a penalty on a stockbroker for delay in filing a quarterly return under Section 77 of the Finance Act, 1994, related to Service Tax. The Superintendent of Central Excise imposed a penalty of Rs. 5,000 for the delay, despite allowing a refund of Rs. 754 on the assessed return. The Commissioner of Central Excise (Appeals) later reduced the penalty to Rs. 1,000, citing the newness of the tax and the stockbroker's first-time payment as reasons for the reduction.

The Revenue filed an appeal against the Commissioner's decision, arguing that the penalty should be at least the statutory minimum of Rs. 100 per day as per Section 77 and Section 80 of the Act. The Revenue contended that once a penalty is deemed necessary, it should not fall below the minimum limit, even if the delay is justified. The case hinged on the interpretation of these statutory provisions and the scope for reducing penalties below the prescribed limits.

In response, the stockbroker explained that the delay in filing was unintentional due to the novelty of the Service Tax system introduced by the government during that period. The stockbroker asserted that there was no malicious intent, as evidenced by the correct payment of Service Tax, even exceeding the due amount, leading to a refund. The stockbroker requested the refund of the sustained penalty of Rs. 1,000.

Upon careful consideration, the Tribunal noted that Section 80 of the Finance Act, 1994 stipulates that no penalty shall apply if the assessee proves a reasonable cause for the failure. It was observed that the Superintendent had imposed the penalty without providing an opportunity for the stockbroker to present any justifications or reasons for the delay. This lack of natural justice led to the Tribunal setting aside the penalty and directing the Superintendent to issue a show cause notice to the stockbroker, allowing an opportunity to prove a reasonable cause for the delay in filing the return. The case was to be re-adjudicated in light of Sections 77 and 80 of the Finance Act, 1994, ensuring due process and consideration of any valid reasons for the delay.