Late return filing after timely tax payment did not justify penalty when no notice under Section 70(2) was served.

Penalty under Section 77 of the Finance Act, 1994 was held unsustainable where service tax had been paid within time, the default was confined to late filing of returns, and no notice under Section 70(2) had been served. The Tribunal also followed its earlier decision in a connected matter arising from the same order-in-appeal, where penalty had been deleted on similar facts. The penalty was therefore set aside.

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Issues: Whether penalty under Section 77 of the Finance Act, 1994 was sustainable when service tax had been paid within time but the returns were filed late and no notice under Section 70(2) was served.

Analysis: The assessee had discharged the tax liability within the prescribed time. The delay related only to filing of returns. The record also showed that no notice was served under Section 70(2), and the case was covered by the Tribunal's earlier decision in a connected matter arising from the same order-in-appeal, where penalty had been set aside in similar circumstances.

Conclusion: The penalty was not sustainable and was set aside, with the appeal allowed.

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