Dr. Chittaranjan Satapathy,
Heard both sides. Shri M. Karthikeyan, Ld. Advocate appearing for the appellants states that service tax in respect of supply of labour service was levied with effect from 16.06.2005, the appellant is an individual and has supplied labour to only one unit, his business was on a very small scale and he was ignorant of the newly introduced legal provisions providing for imposition of service tax. However, when the departmental authorities pointed out the tax liability of the appellants, he promptly paid the entire amount of service tax along with interest well before the issue of Show Cause Notice. He further states that the original authority has not imposed any penalty under Section 76 and 77 invoking the provisions of Section 80 of the Finance Act, 1994 but has however imposed penalty equal to the service tax amount under Section 78 of the Finance Act, 1994. The appellant appealed against the said order to the lower appellate authority but the said authority has not considered the plea of the appellant for waiver of the penalty under Section 78 but has only reduced the same to 25% of the penalty amount taking into account the fact that service tax along with interest was paid before the issue of show cause notice. He pleads that this is a fit case for waiver of penalty under Section 80 as the appellant was ignorant of the law and he has proved his bonafide by paying service tax and interest amount.
2. Heard the Ld. SDR, Shri C. Rangaraju. He states that the appellant has not paid 25% of the penalty amount within one month of the original order and hence full amount of penalty is imposable on them. He supports the grounds of appeal based on which the department’s appeal against the impugned order has been filed for enhancement of the penalty amount reduced by the lower appellate authority.
3. I have considered submissions from both sides. Both sides confirm that no appeal was filed by the department against the order of the original authority before the lower appellate authority. The lower appellate authority has invoked the provisions of Section 80 of the Finance Act, 1994 for not imposing penalties under Section 76 and 77 of the Act. This finding of the original authority that the provision of Section 80 is applicable in respect of the appellant has not been challenged by the department before the next appellate authority. I find that provisions of Section 80 are applicable to penalties imposable under Sections 76, 77 and 78. The said Section 80 does not authorize the adjudicating authority to waive the penalties under some of the listed sections and to impose penalty under some of them. The only condition provided under Section 80 is that if the assessees prove that there was a reasonable cause for failure on his part for attracting penalties under the sections listed there under, no penalty shall be imposable. Once, the original authority was satisfied that there was reasonable cause on the part of the assessees for failure to pay tax, he should have waived the penalties under all the sections listed under Section 80. I also find that the appellants have pleaded before the lower appellate authority that the penalty imposed by the original authority under Section 78 should be waived in view of the provisions of Section 80 but I find that the lower appellate authority has merely recorded the submissions but has not given any finding on the same in his order. As such, the orders of the authorities below imposing penalty under Section 78 cannot be sustained in view of the applicability of Section 80 to the appellants as held by the original authority, which has not been appealed against by the department. Hence, the impugned order is set aside and penalty imposed under Section 78 is waived and the appeal of the appellant assessee is allowed. Consequently, the appeal of the department seeking enhancement of the penalty reduced by the lower appellate authority is also rejected.