1. Briefly stated, facts of the case are as follows:-

1.1 The respondent herein, a stock broker filed, a quarterly return for the quarter January to March, 1995 on 15-5-1995 under the provisions of section 77 of the Finance Act, 1994 relating to ‘service tax’. The Superintendent of Central Excise, Service Tax Cell assessed the said return allowing the refund of Rs. 754. However, he imposed a penalty of Rs. 5,000 for delay in filing the return under section 77 (supra).

1.2 Section 77 of the Finance Act, 1994 reads as follows:

"Penalty for failure to furnish prescribed return. - If a person fails to furnish in due time the return which he is required to furnish under sub-section (1) of section 70 or by notice given under sub-section (2) of that section, he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees for every day during which the failure continues."

1.3 The respondent herein filed an appeal before the Commissioner of Central Excise (Appeals) against the imposition of the aforesaid penalty. The said Commissioner reduced the penalty from Rs. 5,000 to Rs. 1,000 on the ground that this is a new tax and the appellant (respondent herein) paid tax for the first time. The penalty of Rs. 5,000 was considered too harsh by the said Commissioner.

1.4 It is against the aforesaid order of the Commissioner (Appeals) that the revenue has now filed an appeal.

1.5 The ground given in support of the revenue’s appeal is that a combined reading of sections 77 and 80 of the said Act would clearly indicate that once it is held that the penalty is imposable for delay in submission of return, then it has to be at the minimum statutory rate of Rs. 100 per day which may extend to Rs. 200 per day. If the explanation of the assessee for delay in submission of return is found resonable and justified, the proper officer would impose no penalty. It has, therefore, been urged in the revenue’s appeal that there is no scope in the said Act to reduce the penalty below the statutory minimum limit of Rs. 100 per day. It has, therefore, been submitted that the Ld. Commissioner (Appeals) could have, at best, reduced the penalty only to Rs. 3,000 (30 × 100), once he confirmed the offence of the assessee upholding the order-in-original in this regard. The aforesaid ground has been reiterated by the ld. JDR, Shri S.N. Ghosh.

2. Opposing the contention on the aforesaid grounds, the respondents had submitted in their letter dated 16-3-1998 that the service tax was imposed during the period January to March, 1995 for the first time. The return was no doubt due to be filed by 15-4-1995 but the delay was unintentional since the system was newly introduced by the Government. It was further submitted that there could be no mala fide intention inasmuch as the service tax was paid by the respondent currently and in any case in excess of what was due as it is apparent from the refund ordered to the assessee by the Superintendent. It has, therefore, been prayed by the respondent that the refund of Rs. 1,000 of the penalty sustained by the lower appellate authority be ordered.

3. I have carefully considered the pleas advanced from both sides as set out above. I observe that section 80 of the Finance Act, 1994 lays down that no penalty shall be imposable on the assessee for any failure referred to in the said provisions (sections 76, 77, 78 & 79) if the assessee proves that there was reasonable cause for the said failure. I observe that the Assessing Officer, namely, Superintendent of Central Excise, the Service Tax Cell has straightaway imposed a penalty of Rs. 5,000 without giving any show-cause notice to the assessee or an opportunity to the assessee. The assessee has alleged certain factual position that the tax was imposed for the first time in January, 1995 and there has been no failure on his part on any account earlier. This allegation could be considered by the Superintendent, Service Tax Cell o