Contractor granted relief from penalties due to reasonable cause and lack of willful misstatement.

The penalties imposed under Sections 77 and 78 were deleted by the Commissioner (Appeals) and the benefit of Section 80 of the Finance Act was extended to the respondent, a contractor providing services. The Commissioner accepted that the respondent had paid tax before adjudication, showing reasonable cause for non-deposit of Service Tax, and was unaware of the tax obligations. The Tribunal, following a High Court ruling, emphasized the lack of willful misstatement or fraud and upheld the deletion of the penalty. The Revenue's appeal was dismissed, affirming the respondent's entitlement to consequential benefits under the law.

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Issues: Whether the Commissioner (Appeals) rightly deleted the penalty imposed under Sections 77 and 78 and extended the benefit of Section 80 of the Finance Act.

Analysis:
The appeal revolved around the deletion of penalties and the extension of benefits under the Finance Act. The respondent, a contractor providing various services, was issued a show cause notice for Service Tax for the period 2005-06 to 2009-10. The Order-in-Original confirmed the demand and imposed penalties under Sections 77 and 78. The Commissioner (Appeals) accepted the contention that the respondent had paid tax prior to the adjudication proceedings, showing a reasonable cause for non-deposit of Service Tax. The Commissioner also noted the unawareness of the respondent regarding charging Service Tax from service receivers. Consequently, the penalties under Sections 77 and 78 were deleted by extending the benefit of Section 80.

The Tribunal referred to a ruling by the Hon'ble Allahabad High Court in a similar case, emphasizing the general unawareness among service providers regarding tax liabilities. The High Court held that in the absence of fraud or willful misstatement, penalties could not be imposed. Citing a Supreme Court ruling, the High Court emphasized that willful suppression required a positive act from the assessee, which was not evident in this case. Therefore, the High Court deleted the penalty, a decision upheld by the Tribunal. The Tribunal found the facts of the present case aligned with the High Court's ruling, leading to the dismissal of the Revenue's appeal. The respondent was entitled to consequential benefits as per the law.

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