Pre-notice payment and intimation of service tax bars notice and penalties under the Finance Act framework.

Where service tax and interest are paid before issuance of notice, and the department is informed in writing, section 73(3) bars issuance of a notice for the amount so paid. On that basis, penalty proceedings under sections 76, 77 and 78 were held unsustainable because the liability had already been discharged and communicated before the show-cause notice.

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Issues: Whether the assessee, having paid the service tax and interest before issuance of notice and informed the department, was entitled to the benefit of section 73(3) of the Finance Act, 1994 and consequentially not liable to penalties under sections 76, 77 and 78.

Analysis: The assessee discharged the service tax liability along with interest immediately after the lapse was pointed out and also informed the department in writing. On a plain reading of section 73(3), where tax due is paid on the assessee's own ascertainment or on ascertainment by the officer and such payment is communicated before service of notice, no notice under section 73(1) is to be issued for the amount so paid. Since the tax and interest stood paid before the show-cause notice, invocation of the notice and the consequential penalty proceedings were not warranted.

Conclusion: The assessee was entitled to the benefit of section 73(3) and the penalties imposed under sections 76, 77 and 78 were unsustainable.

Final Conclusion: The appeal succeeded and the impugned penalties were set aside with consequential relief, including refund of any penalties already deposited.

Ratio Decidendi: Payment of service tax and interest before notice, coupled with written intimation to the department, attracts section 73(3) and bars issuance of notice and penalty proceedings for the amount so paid.

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