Whether penalty under Section 76 can be reduced below the minimum limit prescribed by invoking Section 80?

PJ/Case law/2014-15/2200

Case:- COMMISSIONER OF CENTRAL EXCISE & CUSTOMS VERSUS ASHISH AMAND & CO.

Citation:- 2014 (33) S.T.R. 153 (Guj.)

Brief facts:- Material facts of this case are that the respondent is a holder of Service Tax Registration under Section 69 of the Finance Act, 1994 (the Act) under the category of “Maintenance and Repair service”. The respondent filed service tax returns late by 414 days and 329 days respectively. The respondent had also short paid interest of Rs. 118/- for the period October, 2006 to December, 2006. A show cause notice therefore, came to be issued to the respondent proposing to recover interest of Rs. 118/- under Section 75 and for imposition of penalties under Sections 76 and 77 of the Act.

The show cause notice came to be adjudicated vide order dated 27th February, 2008 whereby interest came to be confirmed under Section 75 of the Act and penalty of Rs. 1,30,860/- came to be imposed under Section 76 of the Act. Penalty of Rs. 1,000/- was to be imposed under Section 77 of the Act. The assessee carried the matter in appeal before the Commissioner (Appeals), who vide order dated 12th August, 2008 upheld the order of the adjudicating authority imposing penalty under Sections 76 and 77 of the Act but reduced the penalty under Section 76 of the Act from Rs. 1,30,860/- to Rs. 41,000/-. Against the order of Commissioner (Appeals), Revenue preferred appeal before the Tribunal which was dismissed vide the impugned order.

Appellant’s contention:- Mr. Darshan Parikh, learned Senior Standing Counsel for the appellant submitted that in the light of the provisions of Section 78 of the Act, it was mandatory to impose penalty in terms of the said provision. That there was no discretion vested in the authority to impose a lesser penalty than that provided under the said provision. That as such, the Commissioner (Appeals) was not justified in reducing the penalty imposed under Section 76 of the Act and that the Tribunal was not justified in confirming the same. In support of his submissions, the learned counsel placed reliance upon a decision of the Court in the case of Commissioner, Central Excise and Customs v. Port Officer rendered on 8th July, 2010 in Tax Appeal No. 1367 of 2009 [2010 (257)E.L.T.37 (Guj.) = 2010 (19)S.T.R.641 (Guj.)] to submit that the controversy in issue stands concluded by the said decision in favour of the Revenue.

Reasoning of judgment:- From the facts noted above, the hon’ble bench found that the Commissioner (Appeals) had reduced the penalty imposed under Section 76 of the Act by resorting to the provisions of Section 80 of the Act. This Court, in the case of Commissioner, Central Excise and Customs v. Port Officer (supra) was dealing with the question as to whether penalty under Section 76 of the Finance Act, 1994 can be reduced below the limit prescribed by the section. The Court held that Section 80 of the Act overrides the provisions of Section 76, Section 77, Section 78 and Section 79 of the Act and provides that no penalty shall be imposable even if any one of the said provisions are attracted, if the assessee proves that there was reasonable cause for failure stipulated by any of the provisions. Whether a reasonable cause exists or not is primarily a question of fact. The provision indicates that the onus to establish reasonable cause is on the assessee. Once reasonable cause is established, the authority has discretion to hold that no penalty is imposable. The provision does not say that even upon establishment of reasonable cause, a reduced quantum of penalty is imposable. The provision only says that no penalty is imposable. It was further held that on a conjoint reading of Section 76 and Section 80 of the Finance Act, 1994, it is not possible to envisage a discretion as being vested in the authority to levy penalty below the prescribed limit. If the authority imposing the penalty is not entitled to levy below the minimum prescribed, the appellate Court and the Tribunal cannot read the provision so as being vested with such powers, namely, to reduce the penalty below the minimum prescribed. The Court accordingly answered the question in the negative.
The aforesaid decision was squarely applied to the facts of the this case wherein the Commissioner (Appeals) had reduced the penalty below the minimum prescribed by resorting to the provisions of Section 80 of the Finance Act, which has been confirmed by the Tribunal. In the circumstances, following the said decision, the question is accordingly answered in the negative. The penalty under Section 76 of the Finance Act, 1994 cannot be reduced below the minimum prescribed by invoking Section 80 of the Finance Act, 1994.
In the light of the aforesaid, the appeal is accordingly allowed in the following terms. The impugned order of the Tribunal is hereby quashed and set aside. Appeal No. ST/169/2008 is restored to the file of the Tribunal. The Tribunal shall decide the appeal afresh in light of the decision of this Court in the case of Commissioner of Central Excise and Customs v. Port Officer (supra), after giving the parties reasonable opportunity of hearing.

Decision:- Appeal allowed.

Comment:- The gist of this case is that reduction of penalty under Section 76 of the Finance Act below the minimum prescribed limit by invoking provisions of section 80 of the Finance Act, 1994 is not sustainable because the provision of section 80 only empowers the authority to waive penalty. The provision of section 80 does not give any power to impose reduced penalty and so the appeal of the revenue department was allowed.

Prepared by :- Prayushi Jain

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