2009 (10) TMI 168 - AT - Service Tax

Penalty- reasonable cause u/s 80- M/s. Bhavani Enterprises the respondents have been registered as a service provider under the category of manpower recruitment agency. It was noticed that during the period from October 2006 to March 2007 they had failed to make payment of service tax within the time limit and they had also filed the return late. Commissioner (Appeals) reduced the penalty as the assessee was a small unit it had already paid entire service tax amount and interest and it was its first default. In the light of the various decisions held that- uphold the order of commissioner (Appeals) and reject the appeal filed by revenue.

Summary

Issues: Penalty under sections 76 and 77 of the Finance Act, 1994; Applicability of section 80 of the Finance Act, 1994 for lenient view on penalty.

In this case, M/s. Bhavani Enterprises, a registered service provider, failed to pay service tax within the stipulated time and filed returns late during a specific period. The Original Adjudicating Authority imposed penalties of Rs. 44,600 under section 76 and Rs. 1,000 under section 77 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) reduced the penalty under section 76 to Rs. 10,000. The revenue challenged this reduction, contending that the case did not warrant a lenient view under section 80 of the Finance Act, 1994.

The revenue argued that the Commissioner (Appeals) erred in reducing the penalty and cited various tribunal decisions to support their stance. However, as nobody appeared on behalf of the respondents, the case proceeded based on the submissions made by the learned DR. The Commissioner (Appeals) had considered the delay in payment of service tax, the respondents' compliance with tax regulations, and the amount paid towards service tax liability. The Commissioner (Appeals) took a lenient view considering the respondents' status as a small unit and their first default, relying on precedents where penalties under section 76 were reduced or set aside under section 80 of the Finance Act, 1994.

The Appellate Tribunal, concurring with the Commissioner (Appeals), upheld the decision that the respondents merited a lenient treatment under section 80 of the Finance Act, 1994. The Tribunal found no grounds to interfere with the Commissioner (Appeals)'s decision and consequently dismissed the appeal filed by the revenue.