Penalty on service tax incentive receipts was not sustained where tax and interest were paid before the show cause notice.

Penalty was held not leviable where an authorised service station had already paid the service tax demand and interest before issuance of the show cause notice. The Tribunal noted that the taxability of incentive received from the bank had been clarified only by Circular No. 87/05/2006-ST dated 06.11.2006, and that the facts were similar to an earlier Tribunal decision where penalty had not been sustained. On those facts, suppression was not established for penal consequences, and the Revenue's challenge failed.

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Issues: Whether penalty was leviable on the assessee for service tax demanded on incentive received from the bank by an authorised service station, in the facts where tax and interest had already been paid before issue of the show cause notice.

Analysis: The factual matrix was found to be similar to an earlier Tribunal decision where penalty had not been sustained. The liability on incentive received by authorised service stations had been clarified only by Circular No. 87/05/2006-ST dated 06.11.2006. Since the tax demand had been paid with interest even before the show cause notice, the circumstances did not justify invoking suppression for penal consequences.

Conclusion: Penalty was not imposable and the Revenue's challenge failed.

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