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ST- Declaration of assessee as sick company by BIFR is sufficient cause under section 80 for wavier of penalties -Tribunal Order upheld : High Court

By TIOL News Service

CHENNAI, SEPT 03, 2013: THE Questions before the High Court:

"1. Whether the declaration of the first respondent as a sick industry with effect from 31.12.2000 by the BIFR could be construed as "reasonable cause" for the purposes of invoking Section 80 of the Finance Act, 1994?

2. Whether the Tribunal was right in setting aside the penalty in full solely on the ground that the first respondent was declared as a sick industry with effect from 31.12.2000?"

The High Court observed,

"It is seen from the order of the CESTAT that on the non-filing of the return, levy of penalty under Section 77 was confirmed. However, as regards the non-payment of tax, it pointed out to the sickness of the company, which ultimately, ended up on filing of petition before BIFR (Board for Industrial and Financial Companies) in the year 2001 declaring as sick company under Section 3 (1) (o) of the Sick Industrial companies (Special provisions) Act, 1985. Based on these facts, the CESTAT held that the assessee had shown 'reasonable cause' on the failure referred to in Section 76, penalty levied could not be sustained. It is no doubt true that the default is with reference to the period from October 1999 to March 2003. It is also a matter of record that the assessee had paid service tax for the period from April 2002 to March 2003.

Considering the financial constraint that the assessee had undergone and on satisfaction that sufficient cause shown by the assesseee for not having been able to pay service tax in time, the CESTAT had deleted the penalty.

We do not find any justifiable cause to disturb the order of the CESTAT, consequently, the Civil Miscellaneous Appeal is dismissed."

(See 2013-TIOL-662-HC-MAD-ST)


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