Pre-notice payment of service tax and interest may end penalty proceedings absent suppression with intent to evade.

Penalty under Sections 76, 77 and 78 of the Finance Act was questioned where service tax and interest had already been paid before issue of the show cause notice. The Board's circular dated 3-10-2007, as relied upon, stated that proceedings conclude where tax with interest is paid before notice and there is no suppression with intent to evade. Because the order-in-appeal did not deal with the circular or its effect, the matter required reconsideration after hearing the appellant. The impugned order was set aside and the case was remanded to the Commissioner (Appeals) for fresh decision.

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Issues: Whether penalty under Sections 76, 77 and 78 of the Finance Act could survive when service tax along with interest had been paid before issuance of the show cause notice and the Board's circular dated 3-10-2007 was relied upon.

Analysis: The appellant had paid the tax and interest suo motu before the notice and relied on the Board's circular clarifying that where service tax with interest is paid prior to notice and there is no suppression with intent to evade, the proceedings conclude. The order-in-appeal contained no finding on this circular or on its effect. The matter therefore required reconsideration in the light of the circular and after granting hearing.

Conclusion: The impugned order was set aside and the matter was remanded to the Commissioner (Appeals) for fresh decision.

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