Penalty enhancement under Section 76 must rest on independent reasons, not a bare reading of the statutory minimum.

Penalty under Section 76 of the Finance Act, 1994 cannot be enhanced mechanically by relying only on the statutory minimum where the adjudicating authority has exercised discretion and given reasons for a lower penalty. The enhancement order was invalid because it recorded no independent reasons and ignored the basis on which the original authority fixed penalty at Rs. 1,000. The earlier discretionary penalty was therefore protected, and the enhancement was set aside.

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Issues: Whether the enhancement of penalty under Section 76 of the Finance Act, 1994 from Rs. 1,000/- to Rs. 1,46,709/- was sustainable when the adjudicating authority had exercised discretion in fixing a lower penalty and no independent reasons were given for enhancement.

Analysis: The penalty was enhanced only on the footing that Section 76 prescribed a minimum penalty of Rs. 100 per day for delayed payment of service tax. The relevant law, as applied by the Court, recognised discretion in the imposition of penalty under Section 76 and permitted a penalty lower than the statutory figure in appropriate cases. The enhancement order did not record any reason beyond a literal reliance on the statutory language, whereas the original adjudication had assigned reasons for imposing only Rs. 1,000/-.

Conclusion: The enhancement of penalty was not sustainable and was set aside; the appeal was allowed.

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