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2022 (2) TMI 734 - AT - Service TaxQuantum of penalty - penalty of ₹ 2,56,000/- being confirmed against him against the duty liability of the appellant for an amount of ₹ 40,318/- - whether the said imposition is not permissible being disproportionate? - HELD THAT:- Reliance placed upon the decision of Hon’ble Karnataka High Court in PHILIPS ELECTRONICS INDIA LTD. VERSUS STATE OF KARNATAKA [2009 (1) TMI 182 - KARNATAKA HIGH COURT] wherein it has been held that the penalty cannot be more than the tax amount to be recovered from the assessee. It was specifically held by the Hon’ble High Court that penalty based on extent of delay which sometimes exceeds the liability is grossly disproportionate and arbitrary penalty which is also an irrational levy automatically looses nexus achieving the object of correcting mischief sought to be preventive by the Legislation and therefore, renders itself unconstitutional. Also keeping in view that per day penalty at the rate of ₹ 200/- can be levied in terms of sub-clause (3) of section 77 of Central Excise Act and the SCN is silent about specifically invoking the said sub-clause (3), it is held that the grievance of the present appeal stands already covered by the decisions as discussed above. The issue, therefore, is no more res-integra. Imposition of penalty of ₹ 2,56,000/-+ ₹ 5000 + 40318/- as against the duty demand of ₹ 40,318/- is therefore, held to be unreasonable being absolutely disproportionate. Question of adjusting the said amount except for ₹ 40,318/- from the refund sanctioned to the appellant, therefore, does not arise. The adjudication with reference to the impugned SCN’s is still pending due to matter being remanded back for afresh adjudication of claim for abatement and reverse charge, the same shall take its own independent course. Hence, setting aside of the present order under challenge to the extent beyond deduction of ₹ 40,318/- shall not be prejudicial to the interest of either of the parties to the lis - Appeal allowed.
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