Reasonable cause justified waiver of service tax penalty where taxability of renting of immovable property service was unclear.

Penalty for service tax default may be waived where the relevant period involved genuine confusion over the taxability of Renting of Immovable Property Service and the statute then permitted relief for reasonable cause. On those facts, Section 80 was correctly invoked to delete the penalty under Section 78 of the Finance Act, 1994, and no infirmity was found in that approach. The underlying service tax demand was sustained, but the Revenue's challenge to deletion of penalty failed and the appellate order was affirmed.

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Issues: Whether the penalty imposed under Section 78 of the Finance Act, 1994 could be waived by invoking Section 80 on the ground of reasonable cause arising from confusion regarding the taxability of Renting of Immovable Property Service.

Analysis: The penalty under Section 78 had been set aside by the Commissioner (Appeals) by applying Section 80, which was considered available for the relevant period. The basis recorded was that there had been confusion regarding the taxability of Renting of Immovable Property Service during the material time, constituting sufficient cause for waiver of penalty. No infirmity was found in that reasoning.

Conclusion: The waiver of penalty under Section 80 was upheld and the Revenue's challenge to the deletion of penalty under Section 78 failed.

Final Conclusion: The appellate order sustaining the service tax demand while deleting the penalty was affirmed, and the Revenue's appeal was dismissed.

Ratio Decidendi: Where the relevant period reflects confusion on taxability and the statute then permits waiver for reasonable cause, penalty under Section 78 of the Finance Act, 1994 can be validly deleted by invoking Section 80.

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