Transitional penalty relief under service tax law applied where tax and interest were paid after notice, barring Section 76 penalty.

The amended penalty regime under the Finance Act, 2015 applied where a show cause notice under Section 73(1) had been served but no order under Section 73(2) was passed before the amendment took effect. In that transitional setting, the beneficial proviso to Section 76(1) barred penalty when service tax and interest were paid within thirty days of notice, and the proceedings were treated as concluded. As the tax and interest had already been discharged, penalty under Section 76 was not leviable and waiver of penalty followed.

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Issues: Whether penalty under Section 76 of the Finance Act, 1994 was payable after the amendment introduced by the Finance Act, 2015, in view of the transitional provision in Section 78B and the payment of service tax and interest.

Analysis: The amended regime introduced by Section 78B of the Finance Act, 2015 made the amended provisions of Section 76 applicable where a notice had been served under Section 73(1) but no order had been passed under Section 73(2) before the Finance Bill, 2015 received Presidential assent. Under the amended proviso to Section 76(1), where service tax and interest are paid within thirty days of service of notice under Section 73(1), no penalty is payable and the proceedings are deemed concluded. The show cause notice was issued before the adjudication order, and the tax and interest had already been discharged.

Conclusion: Penalty under Section 76 of the Finance Act, 1994 was not leviable and the assessee was entitled to waiver of penalty.

Ratio Decidendi: Where a show cause notice under Section 73(1) is served before the new transitory regime but no order is passed before the amendment takes effect, the amended, beneficial penalty provision applies and bars penalty if tax and interest stand paid in the manner contemplated by the proviso.

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