Bona fide belief on service tax liability defeated penalty for non-filing of returns pending official clarification.

Penalty for non-filing of service tax returns was unjustified where the assessee acted under a bona fide belief about liability, promptly sought clarification from the jurisdictional authority after service tax was newly imposed on share brokers, obtained registration, and waited for the reply before filing returns. The conduct was treated as bona fide caution rather than wilful default, especially since the department was aware that the assessee was awaiting guidance before complying. On that basis, the penalty was not sustainable and consequential relief followed.

---

---

Issues: Whether penalty for failure to furnish service tax returns was sustainable when the assessee had acted under a genuine belief regarding liability and had sought clarification from the jurisdictional officer before the show cause notices were issued.

Analysis: Service tax had been newly imposed on share brokers from 1-7-1994. The assessee promptly sought clarification from the jurisdictional authority on liability and, pending reply, obtained registration but did not file returns. The clarification was received only after the show cause notices. In these circumstances, the assessee's conduct showed bona fide caution rather than wilful default, and the department was already aware that the assessee was not discharging the obligation while awaiting advice.

Conclusion: The penalty was not justified and the appeal was allowed with consequential relief.

---