Bombay HC overturns Tribunal decision on Service Tax penalty, remands for fresh review

The Hon'ble Bombay High Court set aside the Tribunal's decision to uphold a revised penalty of Rs. 53,034 imposed on the assessees for delayed Service Tax payment, remanding the case for a fresh decision. The Tribunal determined that a penalty of Rs. 100 per day was permissible under Sec. 76 of the Finance Act, 1994, citing precedent. As the penalty did not exceed the statutory limit, the Tribunal upheld the revised penalty, rejecting the appeal.

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Issues: Penalty imposition under Sec. 76 of the Finance Act, 1994 for delay in Service Tax payment.

In this case, the Asstt. Commissioner imposed a penalty of Rs. 2500/- on the assessees for a delay in paying Service Tax under the Real Estate Agents category from October 1998 to June 2003. The department argued that the penalty was too low as per Sec. 76, which allows a penalty of Rs. 100/- per day for late payment. The Commissioner revised the penalty to Rs. 53,034/-, a decision upheld by the Tribunal. The Hon'ble Bombay High Court set aside the Tribunal's order and remanded the case for a fresh decision.

The Tribunal noted that the appellants failed to pay Service Tax and file ST 3 returns on time, with delays ranging from 3 to 58 months. Referring to the ETA Engineering Ltd. v. CCE decision, the Tribunal clarified that a penalty of Rs. 100/- per day could be imposed for late payment. Considering the penalty did not exceed the prescribed limit, the Tribunal upheld the revised penalty and rejected the appeal.

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