Service tax penalty for delayed payment set aside where the assessee paid tax and interest after departmental visit.

Penalty for delayed payment of service tax under Sections 76 and 77 of the Finance Act, 1994 was set aside because the assessee was new to the business and had paid the tax and interest after departmental visit. The earlier and appellate authorities had sustained a reduced penalty on the basis of delay, but the facts showed that the circumstances did not justify a penal levy. The appeal was allowed and the penalty was cancelled.

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Issues: Whether the penalty imposed for delayed payment of service tax under Sections 76 and 77 of the Finance Act, 1994 was liable to be set aside having regard to the facts and circumstances of the case.

Analysis: The appellant was new to the business and had paid the service tax and interest after being visited by the departmental officers. The earlier authority had imposed penalty, and the appellate authority had sustained a reduced penalty on the basis of an allegedly prolonged delay. On the facts found, the delay as characterised below was not accepted as a proper basis for sustaining penalty, and the overall circumstances indicated that the penal levy was not warranted.

Conclusion: The penalty of Rs. 20,000/- was set aside and the appeal was allowed.

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