"22Provided further that if the penalty is payable under this Section, theprovisions of Section 76 shall not apply.Explanation. — For the removal of doubts, it is hereby declared that anyamount paid to the credit of the Central Government prior to the date ofcommunication of the order referred to in the second proviso to sub-Section(1) or the first proviso to sub-Section (2) shall be adjusted against the totalamount due from such person.”3.5 As seen from the aforementioned legal provision, penalty under Section 78 of the Actcan be imposed only if tax has not been levied or paid or has been short-levied orshort paid or erroneously refunded, by reason of (a) fraud; or (b) collusion; or (c)willful mis-statement; or (d) suppression of facts; or (e) contravention of any of theprovisions of the service tax law with an intent to evade payment of Service tax.It issubmitted that the Noticee did not commit any malafide act3.6 In this context, reliance is placed on the decision of Pushpam Pharmaceuticals Co. v.CCE, Bombay1995 (78) ELT 401, wherein while interpreting the term ‘suppression’the Hon’ble Supreme Court held that“The meaning of the word both in law and even otherwise is wellknown. In normal understanding it is not different than what isexplained in various dictionaries unless of course the context in whichit has been used indicates otherwise. A perusal of the proviso indicatesthat it has been used in company of such strong words as fraud,collusion or wilful default. In fact it is the mildest expression used inthe proviso. Yet the surroundings in which it has been used it has to beconstrued strictly. It does not mean any omission. The act must be 23deliberate. In taxation, it can have only one meaning that the correctinformation was not disclosed deliberately to escape from payment ofduty.”3.7 It is submitted that the ratio of the above case is squarely applicable in the presentcase and in the absence of any willful suppression of facts no penalty should be leviedon the Noticee under Section 78 of the Act. Further, it is submitted that there was nomensrea on part of the Noticee to avoid payment of Service tax which is payable underthe authority of law, as the Noticee has always deposited Service tax on services whichare legally taxable in its view.3.8 In light of the above, it is submitted that penalty under Section 78 of the Act is notapplicable in the present matter because of the following reasons:? There was no question of non-payment/ short payment of Service tax;? There was no fraud, collusion, willfullmis-statement, suppression of facts orcontravention of any of the provisions of the Service tax law.? The onus was on the department to establish that the Noticee committed anypositive act to evade payment of Service tax.? It stands acknowledged from the aforementioned discussion that the issue in handwas sub-judice. Given this, it cannot be alleged that this matter was of fraud,concealment, etc. of evasion of Service tax.? The Noticee was acting in a bona fide manner and complying with Service taxlaws. Given this, it cannot be alleged that the Noticee was acting in a mala fidemanner.3.9 Given the above, the SCN is bad in law and hence is liable to be set aside on thisground. 244 Penalties under Section 76 and Section 78 of the Act are mutually exclusive4.3 It is seen that the department has levied the penalty both under Section 76 and 78 ofthe Act. It is submitted that as per the proviso to Section 78 of the Act, if the penalty ispayable under this Section, the provisions of Section 76 shall not apply. For the kindreference, the said proviso has been reproduced below:“Provided further that if the penalty is payable under this Section, theprovisions of Section 76 shall not apply”4.4 Accordingly, simultaneous levy of penalty under Section 76 and 78 of the Act is notwarranted under the provisions of law. Therefore, penalty under Section 76 is liable tobe dropped on this ground itself.5 Penalties under Section 77 of the Act5.1 The assessee has filed the returns complying with the laws and regulations reflecting allthe details duly and correctly. The assessee has shown correctly the amount of taxablevalue and Service tax to be discharged thereon. The tax has also been paid to theaccount of government thereby adhering to the provisions and the rules of the Act.Therefore, the assessee is not liable under the section 77 of the Act for not filing theperiodical ST-3 returns in proper manner for the relevant period. "