Bona fide tax payment before notice defeats Section 76 penalty where the Revenue does not dispute the factual finding.

Penalty under Section 76 of the Finance Act, 1994 was not sustainable where the service tax had been deposited before issue of the show cause notice and the assessee's conduct was found to be bona fide. The appellate authority's factual finding of bona fides was not disputed by the Revenue, and that finding removed the basis for imposing penalty. Reliance on Section 73(4) did not warrant interference with the appellate decision. The penalty was therefore rightly set aside.

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Issues: Whether penalty imposed under Section 76 of the Finance Act, 1994 was liable to be sustained when the tax had been paid and the assessee's conduct was found to be bona fide.

Analysis: The tax was deposited before issuance of the show cause notice, and the Commissioner (Appeals) recorded that the respondent had acted in a bona fide manner. The Revenue did not dispute this factual finding. In these circumstances, the basis for sustaining the penalty did not survive, and the Revenue's reliance on Section 73(4) did not justify interference with the appellate finding.

Conclusion: The penalty under Section 76 was rightly set aside and no interference was warranted.

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