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TMI Blog2021 (4) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. 3. Appeal came to be admitted on 01/12/2014 on the following substantial question of law: "Whether the Tribunal, after holding that reasonable ground exists for non-payment of service tax justified in imposing penalty under Section 76 of the Act when Section 80 of the Finance Act, 1994 starting with the non obstante clause that "not withstanding anything contained in the provisions of section 76, section 77 or 78" emphatic in terms of text states that no penalty shall be imposable on the assessee, if the assessee proves that there was a "reasonable cause" for the said failure ?" 4. The appellant is in the business of producing or printing photographs registered under the Service Tax category of "Photography Services" and render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court of Kerala in the case of Assistant Commissioner v/s. Krishna Poduval [2006(1) S.T.R. 185 (Ker.)] wherein it is held that for imposition of penalty under Section 76 of the Finance Act, no mens rea is required to be established and penalty is imposed in default in payment of tax, the appellant was held to be liable for penalty under Section 76 and the Appellate Court partly allowed the appeal. 6. We have perused the order passed by the Appellate Tribunal. While setting aside the penalty imposed under Section 78 of the Finance Act, the Appellate Tribunal record that penalty under Section 78 is imposable when any of the element such as collusion, fraud, willful mis-statement of facts and contravention of the provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable in terms of this section shall not exceed [fifty per cent of ] the service tax payable." 8. The Tribunal has however lost sight of a relevant provision in form of Section 80 in the said Act which contain a non-obstante clause, which exempt levy of penalty, being imposed on the assessee, if the assessee demonstrate a reasonable cause for the said failure. Section 80 reads thus : "SECTION 80. Penalty not to be imposed in certain Cases - standing anything contained in the provisions of section 76, section 77, section 79, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure." 9. The said Section begin with a non-ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traightened out. It was categorically held that the cost of photo paper, chemical etc. would be included. 11. The position of law was crystallized by the larger Bench decision as there was a large number of decisions holding that the cost of material consumed in process of rendering service is to be excluded from the total amount of charge and this was projected to be the basis of the bonafide belief based on the uncertainty on the position of law is that aspect, the appellant attempt to invoke Section 80. He aver that there was no mens rea to evade the tax but it was the uncertainty in the law which has been projected as a reasonable cause for failure to pay the duty. 12. On perusal of the decision in case of Agarwal Colour Advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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