Amnesty scheme relief for delayed service tax compliance: penalties under sections 76, 77 and balance section 78 penalty were set aside.

An amnesty scheme for delayed service tax compliance extended relief to a service provider that regularised tax and interest within the scheme period, so penalties under sections 76, 77 and the balance penalty under section 78 were set aside. The benefit of the scheme could not be denied merely because the liability was admitted and discharged during the scheme. However, the 25% of penalty already paid under section 78 was not refundable and remained undisturbed.

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Issues: Whether the appellant was entitled to the benefit of the amnesty scheme so as to avoid penalty for delayed service tax compliance, and whether the penalties imposed under sections 76, 77 and the balance penalty under section 78 could be sustained.

Analysis: The appellant had paid the service tax along with interest during the operation of the Government's amnesty scheme. The Tribunal treated the scheme as extending relief to service providers who regularised their liability within the scheme period, and followed the view that the benefit could not be denied merely because the liability was admitted and discharged during the course of the scheme. At the same time, the appellant had already paid 25% of the penalty under section 78, and that amount was not refundable.

Conclusion: The penalties imposed under section 76, the balance penalty in excess of 25% under section 78, and the penalty under section 77 were set aside. The appellant retained the benefit of the scheme, while the amount already paid towards 25% penalty under section 78 was not disturbed.

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