Bona fide belief and payment of tax with interest defeated service tax penalty under section 80.

Penalties for non-payment of service tax were found unsustainable where the assessee had paid the tax and interest after the lapse was pointed out and claimed bona fide belief and reasonable cause. The dispute concerned services provided to an agricultural association, with the assessee stating that service tax was not believed to be payable. In these circumstances, the delay was treated as sufficiently addressed by the payment of interest, and no separate penalty was justified. Relief was therefore granted on the penalty issue, and the penalty was set aside under section 80 of the Finance Act, 1994.

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Issues: Whether the penalties imposed for non-payment of service tax could be sustained when the tax and interest had been paid and the assessee claimed bona fide belief and reasonable cause under section 80 of the Finance Act, 1994.

Analysis: The tax relating to services provided to the agricultural association was not paid under a bona fide belief that service tax was not leviable. The assessee had already deposited the duty along with interest once the lapse was pointed out. In these circumstances, the delay stood covered by the interest payment and there was no justification for imposing a separate penalty.

Conclusion: The penalty was set aside under section 80 of the Finance Act, 1994, and relief was granted to the assessee on the penalty issue.

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