TMI Blog2008 (7) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... rises from Order-in-Review No. 92/2007, dated 30-10-2007 by which Commissioner of Service Tax has set aside the Assistant Commissioner's Order-in-Original, waived penalty under sections 76, 77 and 78 of the Finance Act. He has imposed penalty in terms of the order. The Assistant Commissioner in the Order-in-Original had taken various factors including the bona fide belief held by the assessee with regard to the category under which they 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Royalty Agreement dated 1-1-1999 with IBM World Trade Corporation, New York, USA. The second ground urged is that the service tax was not leviable when payments were made to a non-resident as the provisions existing during that time [that is rule 2(1)(d)(iv)] would not entail the levy of tax on such payments but only provide the mechanism of payment of tax. As there was absence of any charging provision for levy of tax on such payments, therefore, 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 asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '84. Revision of orders by the Commissioner of Central Excise- (1) The Commissioner of Central Excise may call for the record of a proceeding under this Chapter in which an adjudicating authority subordinate to him has passed any decision or order and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Chapter, pass such order thereon as he thinks fit. (2) No order, which is prejudicial to the assessee shall be passed under this section 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Provided that where such person has paid the service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notices are served under sub-section (1) shall be deemed to be concluded: Provided further that where such person has paid service tax in part along with interest and penalty under sub-section (1A), the Central Excise Officer shall determine the amount of service tax or interest not being in excess of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such refund.' 12. For the first time, service tax was introduced in India in the year 1994. Initially, only three services were liable to service tax. Later, gradually more and more services were brought under the tax net, with the result that at present, there are more than 100 taxable services. The point to be appreciated is that the Service Tax Law in our country is evolving. In every budget, new categories of services are introduced. Many a time, the service providers are not clear as to whether the service provided by 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 er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice'. However, when the lapse was pointed out, they paid the service tax even before the issue of show-cause notice. The Original Authority has made an observation 'however because of their action of making good, the payment immediately after pointing out by the departmental officers has diluted the offence committed by them'. Here is a case where the reason given for non-payment is ignorance. When it was told that they are liable for tax, the tax along with interest was paid. The very action of the appellant has shown that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which will compel the victims to approach higher Tribunals for extricating them from the illegal orders. The predicament of such an Officer is quite evident from the fate of the appellant before us. This case on hand is a classic example of the vagaries of a Government servant who can misuse his powers. The Officer acted in an arbitrary and illegal manner in exercise of his so-called judicial powers.' (p. 71) 16. The appellant did not pay the service tax on account of ignorance of law. There is no intention to evade payment of duty. 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 proporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new scheme became operational should be denied the benefit of waiver penal provisions…." (p. 513) It is also of interest to note that there is no provision of prosecution in respect of offences relating to service tax. In respect of all the cases excepting one under Serial No. 12, there was sufficient cause for non-payment of service tax in time. They are namely ignorance and bona fide belief. The moment the lapse was pointed out in all the cases except that in Serial No. 12, the tax and the interest was paid well before the issue of show-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 o ..... 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