Imposition of Penalty under Section 76

PJ/Case Laws/2010-11/1081

Case: Commissioner of C. Ex. & Customs v/s Bhavani Enterprise

Citation: 2011 (21) STR 107 (Guj.)

Issue:- Whether the penalty under Section 76 of the Finance Act, 1994 can be reduced below the minimum limit prescribed?

Brief Facts:- Respondent-assessee is engaged in providing services under the category of “Manpower Recruitment Service” and is registered under the Service tax for the same. They belatedly paid the due service tax alongwith interest for the period from Oct-2006 to Dec-2006 and Jan-07 to Mar-07 i.e., late by 154 days and 69 days respectively. The ST-3 return for the period Oct-06 to March-07 was also filed late by 75 days. Due to the above lapses, Revenue issued show cause notice to the respondent proposing to impose penalty for late payment of service tax under Section 76 of the Finance Act, 1994 and penalty for late filling of ST-3 returns under Section 77 of the Finance Act, 1994. The Adjudicating Authority imposed penalty u/s 76 and u/s 77.

In appeal, the Commissioner (A) has reduced the penalty u/s 76 to Rs. 10,000/- by invoking Section 80. Revenue filed appeal before the Tribunal against reduction of penalty. The Tribunal rejected the appeal filed by Revenue.

Hence, Revenue has filed this appeal before the High Court.

Reasoning of Judgment:- The High Court noted that the issue involved in the present appeal is similar to the one which was involved in Tax Appeal No. 1367 of 2009 [2010 (19) STR 641 (Guj.)]. In that case, the Court had quashed and set aside the order passed by the Tribunal and restored the matter to the file of the Tribunal to decide the same afresh in accordance with the law.

The High Court has taken the view in that appeal that on a conjoint reading of Section 76 and 80 of the Act, it is not possible to envisage discretion as being vested in the authority to levy a penalty below the minimum prescribed limit. If the Authority imposing the penalty is not entitled to levy below the minimum prescribed, the Appellate Authority and the Tribunal cannot read the provisions so as being vested with such powers, namely, to reduce the penalty below the minimum prescribed. This court has, therefore, answered the question accordingly in the negative and the said tax appeal was disposed of.

Relying upon the aforesaid decision of this court, the High Court quashed and set aside the impugned order of the Tribunal and remanded the matter back to the Tribunal for the fresh observation.

Decision:- Appeal disposed of accordingly.

Comments:- The penalty cannot be reduced below the prescribed limit. It can totally be waived under Section 80 of Service Tax Act.

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PJ/Case Laws/2010-11/1081

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