ORDER
P. Karthikeyan, Member (T)
1. This appeal filed by the Revenue is against an order dated 18-2-05, of the Commissioner of Central Excise (Appeals), Madurai wherein he affirmed the demand of service tax of Rs. 1,19,511/- along with appropriate interest and reduced the penalties of Rs. 10,000/- imposed under Section 76 and Rs. 1,19,511/- imposed under Section 78 of the Finance Act, 1994 to Rs. 5,000/- and Rs. 25,000/- respectively. The appeal seeks to restore the penalties.
2. The facts of the case are that M/s. Ashok Security Services, Tirunelveli had rendered security service to various persons during the period 16-10-98 to 31-8-03 without following the legal formalities, such as registering itself as ‘service provider’ with the Central Excise department, filing returns etc. After following due process of law, the original authority demanded an amount of Rs. 1,19,511/- being the service tax due and not paid, along with equal amount being interest due. Penalties of Rs. 500/- each was imposed under Section 75A and 77 of the Finance Act, 1994. He also imposed penalties of Rs. 10,000/- under Section 76 and Rs. 1,19,511/- under Section 78 of the Finance Act, 1994.
3. In the appeal filed by the Revenue, it is submitted that the respondent had paid the service tax due and the interest thereon on being pointed out by the department. The Revenue’s challenge is confined to the reduction of penalties imposed under Sections 76 and 78 of the Finance Act, 1994 by the Commissioner (Appeals). It is submitted that as per Section 76, the penalty should not be less than an amount computed at the rate of Rs. 100/- per day for the delay in payment which, however, was not to exceed the tax due and not paid. As far as penalty under Section 78 was concerned, the penalty had to be not less than the service tax evaded, the same being the minimum prescribed. Learned SDR relies on a decision of a single member of the Tribunal in Commissioner of Central Excise, Madurai v. Pandian Hotels Ltd. 2006 (3) S.T.R. 416 (Tri.) : 2005 (180) E.L.T. 458 (Tri.-Chennai). In the said decision, the assessee had paid the service tax due after a delay of 330 days and the Tribunal found that the assessee had not established that there was ‘reasonable cause’ for its failure to pay the tax in time. The Tribunal, therefore, decided that minimum penalty prescribed under Section 76 had to be imposed on the assessee. None appeared for the respondents despite notice nor is there any request of theirs for adjournment. Hence I take up the appeal.
3.1. In the impugned order, the Commissioner found that the respondents had contravened the provisions relating to registration, filing of returns and payment of service tax. Before the Commissioner (Appeals), the respondents had argued that they were sub-contractors of M/s. Batliboi Enxco (P) Ltd., M/s. R.S. Windhtech and M/s. Version Software Ltd., who had redeployed the services of the respondents to various windmills who had entered into contracts with the above parties for maintenance of their windmills on an annual basis. The assessee had contended that the above parties were the ‘service providers’ and not the assessee. The assessee had taken the stand that the impugned services were part of maintenance service provided by the clients of the assessee. The service tax had been paid for the maintenance service rendered for the windmills by the aforesaid clients of the assessee.
3.2 Considering the facts of the case, the Commissioner (Appeals) came to the conclusion that the appellants alone had provided security services; that they were engaged by M/s. Batliboi Enxco (P) Ltd., M/s. R.S. Windtech and M/s. Version Software Ltd. Accordingly, he confirmed the demand of service tax and the interest. He had considered the plea of the assessee that they were not fully aware of the statutory provisions prevalent at the relevant time. He followed the ratio of the decisions of the Tribunal and . In both the above decisions, the Tribunal followed the ratio of the Apex Court’s decision that though penalty is imposable as per the statute, the minimum penalty can be imposed depending upon the facts and circumstances of each case. In the judgment reported as , considering the bona fides of the respondents in that case, the penalty imposed on them for not paying service tax in time was reduced to an amount much lower than the service tax demanded. The Tribunal held in both cases that there was an element of discretion inbuilt in the relevant provisions enabling imposition of penalty.
4. I find that in the instant case, the Commissioner has not found that the respondents had evaded payment of service tax intentionally. From the circumstances of the case, the penalties imposed in the impugned order cannot be held to be inconsistent with the law as interpreted by the above decisions of the Tribunal relied on by the Commissioner (Appeals). The number of days by which the payment of service tax was delayed is not on record and is not furnished by the departmental representative. Therefore, the correctness or otherwise of the penalty imposed under Section 76 by the original authority cannot be easily determined. Original authority had imposed a penalty of Rs. 10,000/- under Section 76 of the Finance Act, 1994 whereas the tax due was Rs. 1,19,511/-. As per the ground in the appeal, the penalty sought to be restored is also not in accordance with law. Section 80 of the Finance Act, 1994, provides for dispensing with the penalties imposable under Sections 76, 77, 78 and 79 in cases where the assessee proved that there was ‘reasonable cause’ for the assessee’s failure to comply with the relevant provisions. In the facts of the present case, it would appear that, the Commissioner’s order reducing the penalties imposed under Sections 76 and 78 is justified. The appellant had bona fidely believed that it was not liable to pay the tax. I find that the Revenue’s appeal is devoid of merit and I dismiss the appeal.
(Dictated and pronounced in open Court.)