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TMI Blog2008 (7) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... were required to pay the service tax for dropping the levy of penalty. We find that in terms of section 80 of the Finance Act, 1994 no penalty is 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. The Assistant Commissioner exercised his powers under section 80 and found that there was reasonable cause for not paying the service tax in time. As the service tax had been paid before the issue of show-cause notice, therefore the penalty was waived. The Commissioner (Appeals) in the impugned order have not examined the reasonable cause in assessee's favour and has set aside the Original order and has imposed the penalty. Hence this appeal. Vision Technology v. CST, Bangalore 3. This appeal arises from Order-in-Review No. 12/2007, dated 7-2-2007. The assessee had paid the tax before the issue of show-cause notice along with 25 per cent of penalty. The Assistant Commissioner accepted the pleas with regard to the reasonable cause for not paying tax in time for the purpose of non-imposition of higher penalty. The Order-in-Original had not imposed penalty under section 76 of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, they held a bona fide belief that no service tax would be payable on the appellant. The learned Counsel showed the details of bona fide belief held by the appellant. He further submitted that the constitutionality of the said service tax was under challenge and as they did not have mala fide intention to evade service tax, they were not liable to be penalized for the reason that they immediately discharged the tax along with interest before the show- cause notice was issued. 5. We have heard both sides in the matter. 6. The learned Counsel relied on the ruling rendered by this Bench in the case of Majestic Mobikes (P.) Ltd. v. CST [2008] 16 STT 296 wherein the provisions of law has been examined and penalties set aside in cases where the assessees have established reasonable and bona fide belief in not depositing the tax and in the cases where service tax was paid before the issue of show-cause notice along with interest. We have examined the rival contentions. We find that this issue has been examined in great detail in the case of Majestic Mobikes (P.) Ltd. (supra). The said final order has been applied in the case of Reach Event Management v. CCE [2008] 16 STT 459 (Bang.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction unless the assessee has been given an opportunity of being heard. (3) The Commissioner of Central Excise shall communicate the order passed by him under sub-section (1) to the assessee, such adjudicating authority and the Board. (4) No order under this section shall be passed by the Commissioner of Central Excise in respect of any issue if an appeal against such is pending before the Commissioner of Central Excise (Appeals). (5) No order under this section shall be passed after the expiry of two years from the date on which the order sought to be revised has been passed.' 11.1 We would also like to reproduce section 73 of the Finance Act as on date. '73. Value of taxable services escaping assessment.-(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax, which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount partly due from such person.' (3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub section (1) in respect of the amount so paid: Provided that the Central Excise Officer may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation.—For the remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them is taxable or not. The CBEC also issues circulars clarifying the law. Even at the time of introduction of the service tax, the Government of India emphasized the culture of voluntary compliance. In other words, the Government was against draconian provisions in practice. Even though some harsh provisions are in the statute book, a close reading of the various provisions indicate that the intention of the Government is not to impose heavy penalties in respect of service providers for various lapses when they pay up the tax short-paid along with the interest. Section 73 deals with recovery of service tax not levied or paid or short-levied or short-paid or erroneous refund. The normal period for demanding a short-paid tax is one year. However, when there is fraud or suppression with intent to evade payment of service tax, the department has got five years for issuing the show-cause notice. Obviously, the above provisions are for the recovery of taxes, which had not been paid. There is an Explanation below section 73(1). In terms of the Explanation, even in cases of suppression of facts with intent to evade service tax, if the service provider pays the full tax and interest and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is ready to comply with the law, Under such circumstances, the Original Authority is of the view that waiver of penalties under sections 76 and 77 can be given in terms of section 80 and also imposition of a nominal penalty under section 78. In our view, the order of the Original Authority is well-reasoned and is not at all arbitrary. The tax paid is to the tune of Rs. 6,68,945, whereas the penalty imposed by the Revisionary Authority is Rs.10,00,000, It is very clear that imposition of such a huge penalty on an assessee who voluntarily complies is uncalled for and very much goes against the spirit of the various provisions of the Finance Act, 1994 relating to service tax which we have earlier quoted. In our view, the Revisionary Authority has exercised his powers for the reason that legally he has the powers. Such power has been exercised ignoring the various provisions already existing in the Finance Act. Even in cases of suppression, if an assessee pays the tax along with interest and 25 per cent penalty, the proceedings are closed. Therefore, what is the justification for imposing a penalty of Rs.10,00,000 for a short-payment of Rs. 6,68,945? A sadistic streak can be discer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When such facts are on record, no further action on the part of the appellant to prove reasonable cause is warranted. What is reasonable cause? The Supreme Court in Motilal Padampat Sugar Mills Co. Ltd v. State of Uttar Pradesh [1978] 118 ITR 326 held that it is well-settled law that 'reasonable cause' can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence acting under normal circumstances without negligence or inaction or want of bona fide. In all the cases decided under revisionary powers by the Commissioner of Service Tax, Bangalore a penalty under section 78 has been enhanced to savage proportions. In the case of Sri Rama Enterprises, the service tax involved is Rs.39,334, the Commissioner has enhanced the penalty under section 78 from Rs. 2,000 to Rs. 59,000. This is not at all justified. The logic of the Commissioner is that the Original Authority confirmed the demand because of suppression of facts. Therefore, severe penalty in terms of section 78 is warranted. He has recorded that the maximum penalty, which can be levied is twice the tax amount short-paid which is Rs. 78,668. Holding such a view, he was merciful enough to im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice. Hence, in all the cases, in Serial Nos. 1 to 14 excepting Serial No. 12, we set aside the impugned Order-in- Revision and restore the Order-in-Original. 18. As regards Serial No. 12, with regard to N.C.S. Storage System, it is seen that the service tax was paid only after the issue of show-cause notice. In these circumstances, non-imposition of penalties under sections 76 and 78 is not justified. However, keeping in view the fact that the service tax was paid before the adjudication, we reduce the penalty under section 78 to Rs.10,000. Otherwise we uphold the Order-in-Revision in respect of N.C.S. Storage. 19. In respect of appeal in Serial No. 15 of the above tabular column namely A.R. Travels, it has been pleaded that due to ignorance with regard to the Service Tax Laws, the appellant did not pay the tax in time. Once the lapse was pointed out by the Departmental Officer, the tax along with interest was paid before the issue of show-cause notice. Further, the appellant has stated that all matters relating to contracts purchased and income-tax etc., were looked after by an accountant. The appellant being illiterate could not understand the intricacies of the Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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