Reasonable cause can justify waiver of service tax penalty when tax and interest are promptly paid and cooperation is shown.

Penalty under the Finance Act, 1994 may be waived where the assessee shows reasonable cause, promptly pays the service tax and interest after the lapse is pointed out, and cooperates with the revenue. On these facts, the authority's discretion under the waiver provision was found properly exercised, even though suppression allegations had been raised. The penalty demand was therefore not sustained and the waiver remained undisturbed.

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Issues: Whether penalty under Sections 76 and 78 of the Finance Act, 1994 was leviable when the assessee paid the service tax and interest immediately on being pointed out and the adjudicating authority had invoked Section 80 of the Finance Act, 1994 on the ground of reasonable cause.

Analysis: Section 80 of the Finance Act, 1994 empowered the authority to waive penalty, including penalty under Section 78, where sufficient cause or reasonable cause was shown. The assessee had already paid the tax and interest upon being pointed out and had cooperated with the revenue authorities. On these facts, the authority's exercise of discretion under Section 80 was supported by the record and did not call for interference.

Conclusion: The waiver of penalty was upheld and the demand for penalty was not sustained.

Final Conclusion: The appeal failed, and the order declining penalty remained undisturbed.

Ratio Decidendi: Where the assessee establishes reasonable cause and promptly discharges the tax liability with interest, the authority may validly waive penalty under Section 80 of the Finance Act, 1994 even in a case involving suppression allegations.

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