Voluntary service tax payment before investigation can defeat penalty where tax and interest are promptly discharged.

Voluntary payment of service tax and interest after liability was clarified, without any prior investigation or show-cause notice, was treated as falling within Section 73 of the Finance Act, 1994. On those facts, the penalty was held to be unsustainable because the assessee had approached the departmental authorities on its own and discharged the dues promptly. The penalty was set aside and the appeal was allowed.

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Issues: Whether the penalty imposed on the assessee was liable to be set aside in view of voluntary disclosure and payment of service tax with interest, in the absence of investigation and show-cause notice.

Analysis: The dispute was confined to penalty. The assessee had voluntarily approached the departmental authorities, paid the service tax along with interest promptly after the liability was clarified, and there had been no investigation or show-cause notice. On these facts, the case was held to fall within Section 73 of the Finance Act, 1994.

Conclusion: The penalty was set aside and the appeal was allowed.

Ratio Decidendi: Where tax and interest are voluntarily paid and no investigation or show-cause notice preceded the payment, penalty is not sustainable on the facts of the case.

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