2008 (1) TMI 138 - AT - Service Tax

Penalties waived for voluntary payment before notice: Promoting compliance and relieving small-time assessees

The appeal was allowed as penalties under Section 76 were set aside based on a High Court judgment, recognizing the appellant's voluntary payment without ... Commissioner concluded that appellant is a small time assessee and has come forward to deposit voluntarily the entire amount of service tax & interest thereon (on watching advertisements for Service Tax payments on television) – hence comm.. (A) set aside the penalty imposed u/s 77 – but Comm. (A) did not recorded any finding on the penalty imposed u/s 76 - fit case for waiver of penalty u/s 76 – HC has already held that provisions of Section 80 can be invoked to set aside penalty u/s 76 Issues:1. Penalty under Section 762. Penalty under Section 773. Applicability of High Court judgmentPenalty under Section 76:The stay application was directed against an Order-in-Appeal that upheld the penalty under Section 76 while setting aside the penalty under Section 77. The Commissioner (Appeals) did not record any findings on the penalty under Section 76. The Member observed that the issue was settled by the Hon'ble High Court of Judicature at Bombay. The Commissioner (Appeals) concluded that the appellant, identified as a small-time assessee, voluntarily paid the entire amount of service tax and interest without any communication from the department. Citing a previous High Court judgment, the penalties imposed on the appellant under Section 76 were set aside, leading to the allowance of the appeal.Penalty under Section 77:The Commissioner (Appeals) set aside the penalty imposed under Section 77 of the Finance Act, 1994, recognizing the appellant's proactive payment of dues before the show cause notice was issued. The Commissioner emphasized the importance of encouraging voluntary compliance and waived the penalty of Rs. 1200, accepting the appeal of the party. The Commissioner's decision was based on the appellant's voluntary payment and the absence of communication from the department regarding the dues. This approach aligned with the vision to promote voluntary compliance and not penalize small-time assessees who proactively fulfill their tax obligations.Applicability of High Court Judgment:The Member noted that the High Court of Bombay, in a previous case, upheld the applicability of Section 80 to set aside penalties under Section 76. Following this precedent, the penalties imposed on the appellant were set aside. The decision to waive penalties under Section 76 was in line with the High Court's interpretation, emphasizing the importance of promoting voluntary compliance and providing relief to assessees who voluntarily fulfill their tax liabilities. The appeal was allowed based on the High Court judgment and the Commissioner's findings regarding the appellant's voluntary payment and compliance.