V.K. Agrawal, Technical Member. - M/s. Sangam Palace have filed this appeal being aggrieved with the imposition of penalty amounting to Rs. 46,800 imposed under section 77 of the Finance Act, 1994 and confirmed by the Commissioner (Appeals) under the impugned Order No. 1540/2000, dated 30-10-2000.

2. Shri P.P. Arora, learned Chartered Accountant, submitted that the Assistant Commissioner imposed a penalty of Rs. 46,800 as they, being a Mandap Keeper, failed to furnish the quarterly returns for the quarter ending September, 1997, December, 1997 and March, 1998 under section 70 of the Finance Act, 1994; that since the Service Tax was a new concept they could not understand its implications; that they had, however, paid all taxes due as soon as they understood the implication of this new levy; that they have been complying with all the requirements of Service Tax since then; that all the assessees under Pathankot Division had submitted their returns late due to lack of general awareness of the Service Tax on "Mandap"; that, further, as a result of protest against tax by the Mandap Keepers and Shamiana Contractor, the Government exempted the service tax provided by Shamiana Contractor; that there was a genuine belief that Service Tax on Mandap had also been exempted which is apparent from the Trade Notice No. 5/98-ST, dated 17-7-1998, issued by the Mumbai-I Commissionerate clarifying that taxable service provided by the Mandap Keeper had not been exempted. He also mentioned that the total liability of Service Tax in respect of all the three quarters was Rs. 550 only and as such penalty amounting to Rs. 46,800 is totally out of proportion and highly unjustifiable. Finally, he relied upon the Final Order No. 186/2001-D, dated 29-8-2001 in the case of Palika Palace v. CCE 2001 (134) ELT 677 (Trib. - Delhi) in which Tribunal reduced the penalty.

3. Countering the arguments, Ms. Ananya Ray, learned SDR, submitted that penalty under section 77 of the Act was mandatory and as the appellants neither registered themselves nor filed requisite returns, penalty imposed is justified; that the delay caused is of 357 days in the case of return for quarter ending 9/97, 266 days in respect of quarter ending 12/97 and 175 days in the case of quarter ending 3/98 and as such penalty cannot be termed as excessive. She relied upon the decision in the case of CCE v. Jagdish Travels 2001 (44) RLT 502/2001 (75) ECC 852 (CEGAT - Delhi) wherein it was observed that section 77 of the Finance Act "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". She further mentioned that the discretion conferred by section 80 of the Act had not been exercised by the Commissioner and as such penalty imposed has to be confirmed.

4. We have considered the submissions of both the sides. The similar issue was considered by the Appellate Tribunal in the case of Palika Palace v. CCE 2001 (134) ELT 677 (Trib. - Delhi) and the Tribunal held as under:-

"In this case, the appellant had not filed the returns within the specified period as they were under the bona fide belief that Mandap Keeper was also exempted from Service Tax along with Pandal and Shamiana Contractors. The Trade Notice No. 5/98-ST, dated 17-7-1998, issued by the Mumbai Commissionerate also take notice of confusion in this regard and the Trade Notice specifically mentioned that there is misunderstanding among the assessees of the Service Tax sector that the taxable service provided by the Mandap Keepers has also been exempted, which is totally incorrect. The Service Tax is in force on the service provided by the Mandap Keeper. In these circumstances, we are of the view that there is reasonable cause for non-filing of the returns within time."

5. Following the ratio of the said decision, the penalty imposed on the Appellant is reduced to Rs. 2,000 only.