Discretionary penalty for late service tax returns upheld, with waiver sustained after consideration of facts and circumstances.

Penalty for delay in filing a service tax return under Section 77 of the Finance Act, 1994 was treated as discretionary rather than automatic. The Tribunal followed its earlier view that Rs. 100 per day was not a compulsory minimum penalty and that the competent authority could waive penalty in appropriate cases. As the appellate authority had waived the penalty after considering the facts and circumstances, no interference was warranted and the waiver was upheld.

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Issues: Whether penalty for delay in filing the service tax return under Section 77 of the Finance Act, 1994 was mandatory at the rate of Rs. 100 per day or was subject to discretion, and whether the waiver of penalty by the appellate authority called for interference.

Analysis: The Tribunal noted that its earlier decision had accepted the view that the penalty provision was discretionary and that Rs. 100 per day was not the minimum compulsory penalty. Since the competent authority could waive penalty in deserving cases, and the impugned order had waived the penalty after considering the relevant facts and circumstances, no basis was found to disturb that exercise of discretion.

Conclusion: The penalty under Section 77 of the Finance Act, 1994 was held to be discretionary and the waiver of penalty was upheld.

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