Voluntary pre-notice payment of service tax and interest defeats penalty proceedings under Section 73, while demand and interest survive.

Where service tax and interest are voluntarily paid before issuance of the show cause notice, continuation of proceedings under Section 73 to impose penalty is not justified because the statutory purpose of recovery has already been met. The liability to tax was not disputed, and the prior deposit satisfied the revenue claim. The demand and interest were maintained, but the penalty was set aside.

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Issues: Whether, after the service tax and interest had already been deposited before issuance of the show cause notice, the proceedings under Section 73 could be continued to sustain penalty.

Analysis: The appellant did not dispute the tax liability and had already deposited the service tax along with interest before the notice was issued. In that situation, the statutory object behind Section 73 stood satisfied and there was no necessity to pursue the notice for penal consequences. The demand and interest were not interfered with, but the circumstances did not justify imposition of penalty.

Conclusion: The penalty was set aside, while the demand and interest were maintained.

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