Section 80 relief bars penalties where voluntary compliance followed ignorance of service tax liability and lenient findings were recorded.

Where the adjudicating authority had extended Section 80 relief on the basis that the assessee was unaware of the service tax liability and had regularised compliance on learning of it, penalties under Sections 76, 77 and 78 of the Finance Act, 1994 could not be sustained without a valid basis to deny that relief. The revisional authority was not entitled to disregard the lenient factual finding recorded by the adjudicating authority and impose penalties in those circumstances. The revision order was therefore set aside and the penalties were held not sustainable.

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Issues: Whether the penalties imposed under Sections 76, 77 and 78 of the Finance Act, 1994 were sustainable when the adjudicating authority had extended the benefit of Section 80 of the Finance Act, 1994.

Analysis: The adjudicating authority had consciously taken a lenient view under Section 80 after recording that the assessee was unaware of the service tax liability and had regularised compliance on coming to know of it. In such circumstances, the revisional authority could not disregard that finding and impose penalties under Sections 76, 77 and 78 without a sustainable basis for denying Section 80 relief.

Conclusion: The penalties were not sustainable and the revision order imposing them was set aside.

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