Penalty under section 76 set aside despite sustained section 78 penalty, with leniency upheld on the facts.

Penalty under section 76 of the Finance Act, 1994 was upheld as set aside while the separate penalty under section 78 remained sustained, because the service tax demand was undisputed and the appellate authority had exercised leniency within the scope of section 80 on the facts of the case. The Department's reliance on its cited authority did not justify interference, so the challenge to the deletion of section 76 penalty was rejected.

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Issues: Whether the penalty under section 76 of the Finance Act, 1994, could be set aside while the penalty under section 78 remained upheld, in the facts of the case.

Analysis: The service tax demand was not in dispute and the penalty under section 78 had already been sustained. Considering the quantum involved and the statutory scope for leniency under section 80 of the Finance Act, 1994, the appellate order setting aside the penalty under section 76 was found to be reasonable. The decision relied upon by the Department did not warrant interference on the facts of this case.

Conclusion: The setting aside of the penalty under section 76 was upheld and the Department's challenge was rejected.

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