Late filing penalty under service tax law was reduced where a new assessee filed initial returns and leniency was warranted.

Late filing of ST-3 returns by a new assessee under the service tax regime was treated with leniency where the returns were the initial filings and the tax involved was small. Relying on earlier Tribunal decisions, the penalty under Section 77 of the Finance Act, 1994 was viewed as excessive if maintained at the original amount, and was therefore reduced. Partial relief was granted by lowering the penalty from Rs. 9,700 to Rs. 1,000.

---

---

Issues: Whether the penalty imposed under Section 77 of the Finance Act, 1994 for late filing of ST-3 returns was justified in the facts of the case, and whether the quantum of penalty required reduction.

Analysis: The appellants' returns were the initial returns filed after the introduction of service tax, and the assessee was treated as new to the tax regime. The Tribunal also noted that the tax involved was small and relied on earlier Tribunal decisions holding that late filing by a new assessee in the initial stage may justify leniency. In these circumstances, the penalty was considered excessive if maintained at the original amount.

Conclusion: The penalty was reduced from Rs. 9,700 to Rs. 1,000, and the assessee obtained partial relief.

---