Reasonable cause and bona fide belief justified waiver of service tax penalties under Section 80.

Penalty under Sections 76, 77 and 78 of the Finance Act, 1994 was waived where the assessee showed reasonable cause and bona fide belief. The dispute concerned penalty only, as service tax liability was conceded. The assessee maintained that the service was factory canteen catering and that, during the initial levy period, it honestly believed it was not providing taxable outdoor catering service. On those facts, Section 80 was treated as permitting waiver because sufficient cause for the failure was established, and the penalty was set aside.

---

---

Issues: Whether penalty under Sections 76, 77 and 78 of the Finance Act, 1994 was liable to be waived under Section 80 on the ground of reasonable cause and bona fide belief.

Analysis: The dispute concerned only the penalty, as the demand of service tax was conceded. The assessee claimed that the service was in the nature of factory canteen catering and that the relevant period was the initial period of levy, during which it believed in good faith that it was not providing taxable outdoor catering service. Section 80 permitted waiver of penalty where reasonable cause for the failure was established, and the circumstances showed sufficient cause for non-imposition of penalty.

Conclusion: Penalty under Sections 76, 77 and 78 was rightly set aside in favour of the assessee.

---