Service tax penalties under sections 76 and 77 set aside due to failure to invoke section 80 waiver provisions

CESTAT New Delhi set aside penalties under sections 76 and 77 of the Finance Act while confirming service tax demand. The tribunal found that Section 80 provisions, which allow penalty waiver for reasonable cause, should have been invoked by Commissioner (Appeals) as done in earlier similar matters. Since appellant's bona fides were not in doubt and extended limitation period was not invoked, penalties could not be sustained. Matter remitted to Commissioner (Appeals) to decide whether appellant was justified in paying service tax on Rs. 3,66,93,393/- out of total Rs. 4,30,08,843/-.

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Issues involved:
The issues involved in this case are the imposition of penalty under sections 76 and 77 of the Finance Act, and the calculation of the actual liability of service tax based on the amount received by the appellant.

Imposition of Penalty:
The Tribunal's order from 06.02.2018 indicated that in a previous case, section 80 of the Finance Act was invoked, leading to the non-imposition of penalties under sections 76 and 77. The subsequent decision on 09.09.2019 also did not impose penalties under sections 76 and 77 by utilizing the provisions of section 80. Section 80 of the Finance Act states that no penalty shall be imposed if the assessee proves reasonable cause for the failure. Since the appellant's bona fides were not in doubt and the extended limitation period was not invoked, penalties under sections 76 and 77 cannot be upheld.

Calculation of Actual Liability:
The appellant submitted that the Ministry released service charges of Rs. 3,66,93,393 out of the total Rs. 4,30,08,843. The appellant deposited service tax under protest based on the Point of Taxation Rules, which changed the liability to pay service tax upon the issuance of invoices. The appellant argued that the actual liability should be Rs. 37,79,419 instead of Rs. 44,29,910 as stated in the show cause notice. The Commissioner (Appeals) did not consider these facts, and the matter needs to be remitted to decide if the appellant was correct in paying service tax on Rs. 3,66,93,393. Therefore, the demand of service tax is confirmed, penalties under sections 76 and 77 are set aside, and the case is sent back to the Commissioner (Appeals) for further consideration.

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