2012 (6) TMI 69 - HC - Service Tax

Whether the penalty imposable under the Finance Act, 1994 is automatic – Held that:- imposition of penalty under the Act is not automatic. The ingredients mentioned in the Section should exist. In respect of Sections 76, 77 and 78 of the Act, not only the ingredients of those Sections should exist, but also there should be absence of reasonable cause for the said failure.

Whether Sections 76 and 78 of the Act are mutually exclusive – Held that:- Sections 76 and 78 are mutually exclusive. If penalty is payable under Section 78, Section 76 is not attracted. Therefore, no penalty can be imposed for the same failure under both the provisions.

Even if the ingredients stipulated in Sections 76 and 78 of the Act are established, if "reasonable cause" is shown for the failure, whether the authorities have power to impose penalties given the explicit discretion in Section 80 of the Act – Held that:- Even if the ingredients stipulated in Sections 76 and 78 of the Act are established, if the assessee shows reasonable cause for such failure, then the authority has no power to impose penalty in view of Section 80 of the Act.

Whether the revisional authority has jurisdiction to impose penalty for the first time when it has not been imposed by the adjudicating or assessing authority by invoking Section 80 – Held that:- When the assessing authority, in its discretion has held that no penalty is leviable, by virtue of Section 80 of the Act, the revisional authority cannot invoke its jurisdiction and impose penalty for the first time.

Power of revisional authority - assessing/adjudicating authority was satisfied with the "reasonable cause" shown by the assessees but still penalty was imposed, not on the ground that there was no reasonable cause or that the reasons were not acceptable to him, but penalty was imposed in substance to educate the taxpayer about his moral responsibility - assessee has not challenged the said orders but has paid the same – Held that:- revisional authority had no jurisdiction to interfere with the said orders as the authority held that there was sufficient cause for non-payment of duty. Therefore, the order passed by the revisionary authority is erroneous and calls for interference. Hence, no case for interference with the impugned order is made out. Hence, these appeals are dismissed