Pre-show cause tax payment and absence of fraud allegations can make penalty prima facie unsustainable and support a stay.

Where service tax and interest were paid before issuance of the show cause notice, and no extended period allegation of fraud, suppression, or misstatement was invoked, penalty was viewed as not prima facie sustainable. The reasoning relied on departmental circulars and judicial precedents indicating that proceedings stood concluded in such circumstances and that penalty was not imposable on the available record. On that basis, complete waiver of penalty was treated as a strong prima facie case, and recovery of the penalty was stayed pending disposal of the appeal.

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Issues: Whether penalty was prima facie leviable when the entire service tax along with interest had been paid before issuance of the show cause notice, and whether recovery of the penalty was liable to be stayed pending disposal of the appeal.

Analysis: The appellant had paid the tax dues and interest before the show cause notice. In the absence of invocation of the extended period on allegations of fraud, suppression, or misstatement, the view taken was that penalty was not prima facie sustainable. Reliance was placed on the departmental circular and judicial precedents supporting the position that proceedings stand concluded and penalty is not imposable in such circumstances.

Conclusion: A complete waiver of the penalty was held to be a good prima facie case, and recovery of the penalty was stayed till disposal of the appeal.

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