Penalty notices under the Finance Act upheld as unsustainable deletion was remanded for fresh decision after hearing.

Penalties under Sections 76 and 77 of the Finance Act, 1994 could not be set aside on the basis that the show cause notice omitted any proposal for penalty, because the notices contained specific averments calling upon the respondents to explain why such penalties should not be imposed. The appellate authority's reliance on precedent was also rejected, as that precedent turned on absence of deliberate intent to evade payment, which was not shown here. The order deleting penalty was therefore found unsustainable, and the matter was remanded for fresh decision after granting the respondents an opportunity of hearing.

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Issues: Whether penalties under Sections 76 and 77 of the Finance Act, 1994 were correctly set aside on the grounds that the show cause notice did not propose such penalties and that service tax with interest had been paid before issue of notice.

Analysis: The impugned order was found unsustainable because the show cause notices contained specific averments proposing penalty and requiring an answer as to why penalties under Sections 76 and 77 should not be imposed. The basis adopted by the appellate authority for deleting penalty under Section 76 was also not accepted, as the relied-upon precedent turned on a finding of absence of deliberate intention to evade payment, which was not present in the case under consideration. In the circumstances, the matter required reconsideration after giving the respondents an opportunity of hearing.

Conclusion: The setting aside of penalties was held unsustainable and the matter was remanded for fresh decision.

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