P.S. Bajaj, Judicial Member - This appeal has been directed against the impugned order in appeal dated 15.11.2000 passed by the Commissioner (Appeals) vide which he had set aside the penalty imposed under section 77 of the Finance Act, 1994 of Rs. 27,500/- on the appellants.

2. The facts giving rise to this appeal may briefly be stated as under:

3. The respondents failed to file their quarterly returns ending quarters December 1997, March 1998 and June 1998. They were accordingly saddled with the penalty of Rs. 27,500 by the Assistant Commissioner after getting their reply for the delay in filing the returns which was of 275 days. The respondents contested the correctness of that order of the Assistant Commissioner dated 23.2.1999 and the Commissioner (Appeals) set aside the penalty amount as imposed by the Assistant Commissioner by accepting their appeal.

4. Revenue has come up in appeal before the Tribunal.

5. The learned JDR has assailed the validity of the impugned order in appeal on the ground that the same had been passed in violation of the provisions of Section 77 of the Finance Act, 1994. He has argued that discretion for not imposing penalty could be exercised by the Commissioner (Appeals) only under section 80 of the Finance Act if the sufficient cause was shown by the respondents for the delay in filing the returns. Therefore, the impugned order according to him deserves to be set aside and the matter be sent to the Commissioner (Appeals) for passing fresh order in accordance with law. He has also referred to the Tribunal’s judgment in CCE v. Earth Tour Travels (P.) Ltd. 2001 (43) RLT 50 (CEGAT - Delhi).

6. On the other hand, the learned representative of the respondents has contended that the Commissioner (Appeals) had the discretion under Section 77 of the Finance Act to reduce the penalty or not to impose any penalty amount and as such the impugned order passed by him is prefectly valid. He has in support of his contention placed reliance on CCE v. Milan Tent Palace 2001 (43) RLT 51 (CEGAT - Delhi), Vijaya Clearing & Forwarding Agency v. CCE 2000 (123) ELT 930 (Trib. - Mum.) and Harilal & Co. v. CCE 2000 (115) ELT 375 (Trib. - Mum.).

7. Admittedly, there had been delay of 275 days on the part of the respondents in filing the returns. No doubt, they are said to had paid the service tax later on for the quarter in dispute ending December 1997, March 1998 and June 1998 along with the interest but still they could be proceeded against for imposition of penalty under section 77 of the Finance Act, 1994. The said Section clearly mandates that the assessee shall become liable for payment of penalty on his failure to file the returns in time at the minimum rate of Rs. 100 per day which may extend to Rs. 200 per day (as it stood at the relevant time). The discretion for non-imposition of penalty could be exercised by the authority only under section 80 of the Finance Act which enacts that notwithstanding anything contained in the provisions of sections 76 and 77 or 79, no penalty shall be imposable on the assessee’s failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure. In the instant case, the Commissioner has not exercised his power under this section of the Finance Act, for want of indication to this effect in the impugned order. He has not recorded the findings that the respondents were prevented by sufficient cause in filing the quarterly returns for the disputed period and that he was satisfied with that cause. Therefore, his impugned order setting aside the entire penalty amount as imposed by the Assistant Commissioner on the respondents without recording any sufficient cause, cannot be legally sustained being not in consonance with the provisions of Section 77 of the Act.

8. The ratio of the law laid down in Milan Tent Palace’s case (supra) is not attracted to the facts of the present case as in that case the provisions of section 80 of the Financ