Bona fide delay in service tax payment can defeat Section 76 penalty when tax and interest are paid before notice.

Penalty under Section 76 of the Finance Act, 1994 was held unsustainable where service tax and interest for delayed payment had been remitted before the show cause notice, and the delay was shown to be bona fide. The Tribunal treated the delay as arising from the time needed to collect and compile data from multiple turnkey project sites, and found no active suppression or deliberate default. On those facts, the matter was considered comparable to cases where the statutory relaxation from penalty is available under the Section 73(3) framework, and the penalty was set aside.

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Issues: Whether penalty under Section 76 of the Finance Act, 1994 was sustainable where service tax and interest were paid before issuance of the show cause notice and the delay in payment was claimed to be bona fide.

Analysis: The liability related only to delayed remittance of service tax for a limited period, and the interest was paid during audit before the show cause notice. The delay was found to be attributable to the time taken to collect and compile data from multiple turnkey project sites. In such circumstances, the facts were treated as genuine and comparable to cases where the benefit of Section 73(3) has been applied to avoid penalty, particularly where there was no active suppression or deliberate default. The Tribunal also accepted that the circumstances justified invocation of the statutory relaxation from penalty.

Conclusion: Penalty under Section 76 of the Finance Act, 1994 was not sustainable and was set aside in favour of the assessee.

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