PSU Unit allowed to contest penalty despite no duty liability challenge. Tribunal grants waiver for penalty exceeding Rs. 1.96 crores.

The Tribunal allowed the appellant, a PSU Unit, to contest the penalty aspect despite not permitting them to contest the duty liability for the Service Tax period. Considering the absence of a specific tax liability category during the relevant period, the Tribunal found a prima facie case for penalty waiver. With the penalty amount exceeding Rs. 1.96 crores, the Tribunal expedited the handling of the matter, scheduling the appeal for a hearing and granting a stay application until then.

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Issues:
1. Contesting duty liability and penalty waiver for Service Tax period.
2. Consideration of penalty imposition post payment of tax liability.
3. Relevance of Order-in-Original No. 7/2007 in the case.

Analysis:
1. The appellant, a PSU Unit, sought to contest the duty liability and requested a waiver of penalty for the Service Tax period from 16-7-2001 to 31-10-2004. Despite having paid the Service Tax confirmed, they argued that penalty should not be levied as the category for recovery of Service Tax on credit card commissions was not present in the Finance Act during the said period. The Committee of Secretaries did not allow them to contest the duty liability. However, they were granted permission to contest the penalty aspect.

2. The Tribunal considered the submissions from both sides. The appellant provided copies of Order-in-Original No. 7/2007 related to Vijaya Bank, which was passed by the Commissioner of Large Tax Payers' Unit, Bangalore. The JDR representing the respondent argued that since the tax liability had been settled, penalty should be imposed. However, the Tribunal noted that the Committee of Secretaries permitted the appellant to contest the penalty issue. Referring to the Order-in-Original related to Vijaya Bank, the Commissioner found that during the relevant period, there was no specific category for levying Service Tax, indicating a strong case for non-levy of penalty in the present matter.

3. Based on the findings and considerations, the Tribunal observed that the appellant had a prima facie case for penalty waiver due to the absence of a specific tax liability category during the relevant period. Noting that the penalty amount exceeded Rs. 1.96 crores, the Tribunal decided that the matter warranted expedited handling. Consequently, the Tribunal scheduled the appeal for a hearing on 27th June 2008 and allowed the stay application in the interim. The decision was pronounced and dictated in an open court session.

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