Penalty for late ST-3 filing may be moderated for a new service tax registrant filing initial returns.

Penalty for late filing of initial ST-3 returns by a new service tax registrant under Section 77 of the Finance Act, 1994 was moderated on the facts, because the levy was new to the assessee, the returns were its first three filings, and the delay was considered in light of the small tax involved and earlier Tribunal views. The Tribunal therefore did not sustain the per-day penalty mechanically and reduced it from Rs. 9,700 to Rs. 1,000. Relief was granted only to that extent, and the balance of the challenge failed.

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Issues: Whether the penalty imposed under Section 77 of the Finance Act, 1994 for late filing of ST-3 returns was required to be sustained in full, or could be reduced having regard to the assessee being a new service tax registrant filing its initial returns.

Analysis: Section 77 was invoked for delayed filing of returns, with the penalty computed at a per-day rate. The Tribunal noted that the returns in question were the assessee's first three returns and that service tax was a newly introduced levy for the assessee. It also took into account the comparatively small tax amount involved and the earlier Tribunal decisions relied upon by the assessee, including the view that in appropriate circumstances the entire penalty may be set aside for a new assessee unfamiliar with the filing requirement.

Conclusion: The penalty was reduced from Rs. 9,700 to Rs. 1,000. The appeal succeeded only to that extent and was otherwise rejected.

Final Conclusion: The imposition of penalty under Section 77 was not upheld in full, and relief was granted by substantially reducing the penalty amount.

Ratio Decidendi: For delay in filing initial service tax returns by a new assessee, penalty under Section 77 may be moderated on the facts of the case, and need not be sustained mechanically at the original amount.

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