Suppression-based service tax penalties may be reduced where tax is paid before notice, but mitigation depends on surrounding facts.

In a service tax matter involving suppression of taxable value, pre-notice payment of tax was treated as a mitigating factor, but it did not fully absence of intent to evade because the record showed suppression of high-value ticket sales and payment only after departmental investigation. On that basis, the penalty under Section 76 was set aside, while the penalty under Section 78 was reduced in view of the earlier payment and the surrounding circumstances. The decision illustrates that pre-show-cause payment can lessen penal consequences, but it does not automatically negate suppression-based liability.

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Issues: Whether, in a service tax case involving suppression of taxable value, the penalties under Sections 76 and 78 were sustainable and, if so, to what extent.

Analysis: The appellant had paid the service tax before issuance of the show cause notice, but the record showed that the value of high-value tickets had been suppressed and payment was made only after departmental investigation. On that basis, the Tribunal held that the plea of absence of intent to evade could not be accepted in full. At the same time, the pre-notice payment was treated as a relevant mitigating factor for reducing the penal consequences.

Conclusion: The penalty under Section 76 was set aside and the penalty under Section 78 was reduced to Rs. 1,00,000/-.

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