Reasonable cause under service tax law can justify penalty relief where appellate discretion is exercised without perversity.

Section 80 of the Finance Act overrides the penalty provisions in Sections 76, 77 and 78 where an assessee establishes reasonable cause for the failure. On that basis, the appellate authority may reduce or waive penalty, and prompt payment of part of the disputed amount after the discrepancy is pointed out may support that discretion. The CESTAT found no perversity or legal error in the Commissioner (Appeals)' exercise of discretion and sustained the reduced penalty, treating the assessee's reasonable cause plea as sufficient to justify relief from the full penalty.

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Issues: Whether the reduction of penalty under Sections 76 and 78 of the Finance Act was warranted in view of the assessee's plea of reasonable cause under Section 80 of the Finance Act.

Analysis: Section 80 of the Finance Act overrides the penal provisions in Sections 76, 77 and 78 where the assessee proves reasonable cause for the failure. The Commissioner (Appeals) considered that the assessee had deposited part of the amount promptly after the discrepancy was pointed out and, on that basis, reduced the penalty. No perversity or legal error was shown in the exercise of that discretion.

Conclusion: The reduction of penalty was justified and no interference was called for; the issue is decided against the Revenue and in favour of the assessee.

Ratio Decidendi: Where reasonable cause is established, Section 80 permits non-imposition or reduction of penalty under the service tax penalty provisions, and the appellate authority's discretionary assessment will not be disturbed absent error or perversity.

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