Penalty waiver for service tax on property rental upheld where tax and interest were paid within time.

Penalty for failure to pay service tax on renting of immovable property was not sustainable where the assessee had paid the tax and interest within the prescribed period and thereby satisfied the statutory waiver condition. The underlying tax demand and interest remained undisturbed, but the penalty was set aside because the scheme expressly barred penalty once full payment with interest was made in time. The operative principle is that timely discharge of tax and interest attracts penalty immunity under the waiver provision, even though the service tax liability itself continues.

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Issues: Whether penalty was leviable in respect of service tax on renting of immovable property when the tax and interest had already been paid and the statutory condition for waiver of penalty was satisfied.

Analysis: The demand of service tax and interest was not disputed. The dispute related only to penalty. The relevant statutory scheme introduced service tax on renting of immovable property and the later amendment/validation provision was noted. Section 80(2) provided that no penalty shall be imposable for failure to pay the specified service tax where the tax along with interest is paid in full within the prescribed period. Since the appellant had deposited the service tax and interest within the stipulated time, the conditions for penalty waiver stood fulfilled.

Conclusion: Penalty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The demand of service tax and interest remained undisturbed, but the penalty was deleted because the statutory waiver condition had been met.

Ratio Decidendi: Where the statutory conditions for penalty waiver are satisfied by timely payment of the tax and interest, penalty cannot be imposed notwithstanding confirmation of the underlying tax demand.

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