Penalty moderation for delayed service tax compliance where mistake was bona fide and corrected with interest payment.

Penalty under Section 76 of the Finance Act, 1994 for delayed service tax deposit and late return filing may be moderated on the facts where the assessee acted on a tax consultant's advice, later corrected the error, and paid interest. The conduct was not treated as mala fide, and Section 76 was described as prescribing only the maximum penalty, leaving room to reduce the quantum according to the circumstances. On these facts, the penalty was reduced to Rs. 5,000.

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Issues: Whether the penalty imposed under Section 76 of the Finance Act, 1994 for delayed deposit of service tax and late filing of returns was liable to be reduced in view of the explanation offered by the assessee.

Analysis: The delay in filing returns and depositing tax occurred because the assessee acted on the advice of a tax consultant and later rectified the mistake by paying interest. On these facts, the conduct was not treated as mala fide. Section 76 was held to prescribe the maximum penalty, leaving scope to adjust the quantum on the facts of the case.

Conclusion: The penalty was reduced from Rs. 26,800 to Rs. 5,000.

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