Reasonable cause protected the assessee from Section 78 penalty after unchallenged Section 80 relief

Penalty under Section 78 of the Finance Act, 1994 was not restored because the lower appellate authority had already accepted reasonable cause for non-payment of service tax and extended protection under Section 80. Since the Revenue did not challenge the Section 80 finding and relied only on the existence of penalty provisions under Section 78, there was no basis to interfere with the deletion of penalty. The appeal was dismissed.

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Issues: Whether penalty under Section 78 of the Finance Act, 1994 was sustainable when the lower appellate authority had extended the benefit of Section 80 of the Finance Act, 1994 on the basis of reasonable cause for non-payment of service tax.

Analysis: The lower appellate authority had accepted that reasonable cause existed for the non-payment and had granted protection under Section 80 of the Finance Act, 1994. The Revenue did not challenge the grant of protection under Section 80 and relied only on the proposition that Section 78 provides for imposition of penalty. In view of the unchallenged finding under Section 80, no basis remained to interfere with the deletion of penalty.

Conclusion: The penalty under Section 78 was not restored, and the Revenue's appeal was dismissed.

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