Penalty requires finding of suppression or misrepresentation with intent to evade service tax before it can be sustained.

A penalty order under service tax law was held unsustainable because it did not record any finding on suppression of facts or misrepresentation with intent to evade tax, which was the foundational requirement for applying the penalty principle relied on. In the absence of that determination, the lesser-penalty reasoning could not stand. The matter was remanded for fresh consideration, and the assessee was to be heard before the penalty issue was reconsidered by the appellate authority.

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Issues: Whether the penalty order could be sustained without a finding on suppression or misrepresentation with intent to evade payment of service tax, and whether the matter required remand for fresh consideration.

Analysis: The impugned order proceeded on the basis that penalty was leviable and that lesser penalty could not be imposed after reliance on the Supreme Court decision, but it did not record any finding on whether the assessee had suppressed facts or made misrepresentation with intent to evade service tax. Since the applicability of the penalty principle depended on such a finding, the absence of a determination on that foundational issue rendered the order unsustainable. The assessee was also entitled to an opportunity of hearing before the penalty was reconsidered.

Conclusion: The penalty order was set aside and the matter was remanded to the Commissioner (Appeals) to decide the question of penalty afresh after hearing the assessee.

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