- (1.) The Revenue is in appeal under section 35G of the Central Excise Act, 1944 against the order dated 28.02.2011 (Annexure A-4) passed by the Customs Excise & Service Tax Appellate Tribunal, New Delhi (for short "the Tribunal") in ST/Appeal No. 761 /2007. The learned counsel for the Revenue has claimed the following substantial question of law, as arising from the order of the Tribunal: (i) Whether penalty imposed under section 78 of the Finance Act, 1994 can be reduced to 25% by invoking the provisions of first proviso to section 78, when the assessee has not paid 25% of the penalty amount within 30 days of the order as required under the second proviso to section 78 ibid? As per the facts on record, the assessee was working as cable operator as defined in section 65(21) of the Finance Act, 1994 (as amended) (for short 'the Act') without any registration under section 69 of the Act. He was liable to file quarterly service tax returns under section 68 of the Act read with rule 6 of the Service Tax Rules, 1994. A search was conducted at the business as well as residential premises of assessee, but before a show cause notice could be served to the assessee as to why he has not paid duty under the aforesaid Act, the assessee deposited the entire amount of duty and interest thereon. After considering the reply filed to the show cause notice, the Adjudicating Authority confirmed the demand of service tax of Rs. 11,46,537/- along with interest. In addition to the penalties under Sections 75A, 76, 77 & 78 of the Act, the Adjudicating Authority also imposed a penalty of the equivalent amount of the duty payable under section 78 of the Act.
(2.) The assessee preferred an appeal against the said order. The Commissioner (Appeals) set aside the order of imposing penalties. However, in Revenue's appeal, the learned Tribunal vide order dated 1.2.2011 gave an option to the assessee to deposit 25% of the penalty of the service tax demand in terms of second proviso to section 78 of the Act relying upon two judgments of this Court in CCE w. J.R. Fabrics, 2009 238 ELT 209 and CCE v. Bajaj Travels Ltd., 2011 30 STT 293 .
(3.) Learned counsel for the appellant has vehemently argued that the benefit of reduced penalty can be availed by the assessee, if he deposits the amount of penalty within 30 days of the order, but the Authorities under the Act are not competent to give option to the assessee to deposit such amount. The relevant provisions of the Act read as under: 78. Penalty for suppressing value of taxable service - Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of - Provided that where such service tax as determined under sub-section (2) of section 73 and the interest payable thereon under section 75, is paid within 30 days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the service tax so determined: Provided further that the benefit of the reduced penalty under the first proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso.;