Revisional interference with discretionary non-penalty orders is impermissible absent jurisdictional error under service tax law.

Where the original authority lawfully exercised discretion under section 80 of the Finance Act, 1994 and declined to impose penalty on acceptance of cause shown, the Commissioner could not in suo motu revision substitute his own view and levy penalty under sections 76 and 78 absent jurisdictional error. The revisional power was held not to extend to interfering with a discretionary, reasoned non-penalty order merely to impose a different outcome. The challenge therefore failed, and the assessee succeeded.

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Issues: Whether the Commissioner could, in suo motu revisional proceedings, interfere with the original authority's discretionary decision not to impose penalty under section 80 of the Finance Act, 1994 and thereafter levy penalty under sections 76 and 78.

Analysis: The original authority had accepted the cause shown and, by applying section 80, declined to impose penalty. The revisional interference was examined in the light of the settled principle that where the statutory authority has lawfully exercised discretion and no penalty is imposed, the revisional authority cannot substitute its own view merely to impose penalty. The prior decisions relied upon were treated as affirming that such discretionary orders, when passed on satisfaction of cause shown, are not open to interference in revision absent jurisdictional error.

Conclusion: The Commissioner had no jurisdiction to interfere with the discretionary order of the original authority and impose penalty in revisional proceedings. The challenge failed and the assessee succeeded.

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