Enhanced service tax penalty could not apply retrospectively before the amendment's operative date.

The amended penalty of Rs. 100 per day under section 76 of the Finance Act, 1994 applied only from 10-09-2004, so it could not be levied for a default period before that date. The Karnataka HC noted that the Revenue's relied-upon earlier decision did not examine the amendment's effective date and therefore could not control the issue. On the admitted facts, the service tax default occurred before the enhanced penalty became operative, and the question was answered against the Revenue.

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Issues: Whether penalty at the rate of Rs. 100 per day under section 76 of the Finance Act, 1994 could be levied for a period prior to 10-09-2004.

Analysis: The amended provision enhancing penalty to Rs. 100 per day was held to have come into force only from 10-09-2004. The Court found that the earlier decision relied upon by the Revenue did not consider the effective date of the amendment and therefore could not govern the present controversy. On the admitted facts, the service tax default related to a period before the amendment became operative.

Conclusion: Penalty at the enhanced rate could not be imposed for the period prior to 10-09-2004. The question was answered against the Revenue.

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