Penalty waiver for late service tax compliance upheld where tax and interest were voluntarily paid before the scheme took effect.

Penalties for delayed registration and late filing of service tax returns may be waived where the default is procedural, the levy was newly introduced, and the assessee voluntarily pays the tax with interest. The commentary notes that the appellate authority relied on a Board circular and a voluntary disclosure scheme granting immunity from penalties even to non-compliant assessees upon payment of tax and interest. On that basis, an assessee who regularised the liability and paid interest before the scheme became operative was treated as entitled to comparable relief, and the waiver of penalties was upheld.

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Issues: Whether penalties imposed for late registration and delay in filing returns under the service tax law could be waived when the assessee had voluntarily paid the service tax with interest and the Board circular / voluntary compliance scheme supported a lenient view.

Analysis: The appellate authority accepted that the levy was newly introduced and that initial non-compliance by assessees could attract a lenient approach where the defaults were procedural in nature. It also relied on the Board's circular and the voluntary disclosure scheme, under which even assessees who had not complied at all were granted immunity from penalties upon payment of service tax with interest. On that reasoning, a compliant assessee who had regularised the liability and paid interest before the scheme became operational could not be denied similar relief.

Conclusion: The waiver of penalties was upheld and the department's appeal was rejected.

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