Discretionary service tax penalty for delayed return filing upheld where authority waived penalty on the facts

Penalty for delayed filing of a service tax return under Section 77 of the Finance Act, 1994 was treated as discretionary rather than a minimum mandatory levy. On that basis, the competent authority could consider the facts and circumstances and waive the penalty where relief was justified. The Tribunal found that the impugned order had properly exercised that discretion and saw no reason to interfere with the waiver. The Revenue's challenge therefore failed, and the waiver of penalty was upheld.

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Issues: Whether the penalty for delay in filing the service tax return under Section 77 of the Finance Act, 1994 was mandatory or discretionary, and whether the authority could waive the penalty in deserving cases.

Analysis: The Tribunal noted that its earlier decision had already accepted that the penalty prescribed for delayed filing was not a minimum mandatory penalty but was subject to discretion. Once the levy is discretionary, the competent authority is not bound to impose it at the prescribed rate and may waive it where the facts and circumstances justify such relief. The impugned order had waived the penalty after considering the relevant circumstances, and no reason was found to interfere with that exercise of discretion.

Conclusion: The penalty under Section 77 of the Finance Act, 1994 was held to be discretionary, and the waiver of penalty was upheld, against the Revenue.

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