Appeal partially allowed, penalty reduced under Finance Act. Waiver pre-notice payment, upheld post-notice. Penalty reduced to Rs. 34,212.

The appeal in this case was partly allowed, resulting in a reduction of the penalty imposed on the appellants. The penalty on the amount paid before the show-cause notice was waived under Section 73(3) of the Finance Act, 1994. However, the penalty on the amount paid after the notice was upheld, as Section 80 did not apply due to the appellants' registration status. The penalty was reduced to Rs. 34,212 for the post-notice payment.

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Issues:
1. Whether penalty imposed on the appellants should be waived under Section 73(3) and 80 of the Finance Act, 1994.

Analysis:
1. The appellants, a small taxpayer, had crossed the small scale exemption limit in 2005-06 and voluntarily came forward to pay the service tax amount in three equal instalments as orally allowed by jurisdictional officers. However, before the third instalment, a show-cause notice was issued. The appellants paid the third instalment before the adjudication order and also paid interest. The advocate argued for a lenient view under Section 73(3) and 80 of the Finance Act, 1994, to waive the penalty.

2. The Departmental Representative (DR) contended that since the appellants were registered, they cannot plead ignorance about tax liability. Additionally, as the appellants had not filed service tax returns, it was considered a case of suppression, justifying the equal penalty imposed.

3. The judgment held that Section 73(3) covers cases where service tax is paid on the assessee's own ascertainment or on the basis of tax ascertained by Central Excise officers before notice. The amount paid prior to the show-cause notice was considered to have been paid under Section 73(3), leading to setting aside the equal penalty imposed on that amount. However, the penalty on the amount paid after the show-cause notice was upheld, as Section 80 did not apply in this case due to the appellants' registration status.

4. Consequently, the appeal was partly allowed, reducing the penalty to Rs. 34,212 for the amount paid after the show-cause notice, as the provisions of Section 80 did not apply in their situation.

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