Pre-deposit waiver for service tax penalty granted only partly after investigation showed belated compliance and no prima facie ignorance of law.

In a waiver application concerning service tax penalties, the Tribunal held that the plea of ignorance of law was not prima facie acceptable where non-payment had been detected during investigation and tax with interest was deposited only belatedly. Partial interim relief was nevertheless granted on the facts: the applicants were directed to deposit Rs. 1 lakh within six weeks, and upon compliance the balance pre-deposit of penalty under Sections 78 and 77 of the Finance Act, 1994 was waived and recovery stayed until disposal of the appeal.

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Issues: Whether, in an application for waiver of pre-deposit of service tax penalty, the applicants were entitled to complete waiver of the penalty imposed under Section 78 of the Finance Act, 1994 and the connected penalty under Section 77 of the Finance Act, 1994.

Analysis: The applicants had deposited the tax along with interest belatedly and relied on ignorance of law, while the record showed that non-payment had been detected during investigation. The Tribunal found that, prima facie, the plea of ignorance of law could not be accepted, though the surrounding facts warranted partial relief at the interim stage.

Outcome: The applicants were directed to deposit Rs. 1 lakh within six weeks, and on such deposit the balance pre-deposit of penalty was waived and recovery stayed till disposal of the appeal.

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