Reasonable cause for service tax delay did not justify full penalty waiver, though partial relief was granted.

Penalty for delayed service tax payment and delayed return filing was examined on the question whether reasonable cause under Section 80 of the Finance Act, 1994 justified waiver or reduction. The appellant was already registered and aware of the service tax liability, so financial crisis was not accepted as reasonable cause for full exemption from penalty. However, payment of tax and interest before the show cause notice, together with the surrounding circumstances, supported partial relief. Full waiver was denied, but the penalty was reduced.

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Issues: Whether penalty for delayed payment of service tax and delayed filing of returns was liable to be waived or reduced on the ground of reasonable cause under Section 80 of the Finance Act, 1994.

Analysis: The appellant had been registered with the department and was aware of the service tax liability. Financial crisis was held not to constitute reasonable cause within the meaning of Section 80. At the same time, the tax and interest had been paid before issue of the show cause notice, and the surrounding circumstances were taken into account for relief in penalty.

Conclusion: Full waiver of penalty was denied, but the penalty was reduced to Rs. 25,000.

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