Reasonable cause for non-payment justified waiver of service tax penalties despite undisputed demand and interest.

Service tax demand and interest were not contested, but the penalty issue turned on whether reasonable cause existed for non-payment. The appellant's status as a proprietary concern, prevailing doubt on taxability, and a Board circular cited in support were treated as circumstances showing bona fide doubt. On that basis, the statutory provision permitting waiver of penalty was properly invoked, and the penalties were set aside.

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Issues: Whether the penalties imposed under the service tax provisions were liable to be set aside on account of sufficient cause and bona fide doubt regarding taxability.

Analysis: The demand of service tax and interest was not contested. On the question of penalty, the appellant's status as a proprietary concern, the prevailing doubt in the field, and the Board's circular cited in support were treated as circumstances showing reasonable cause for non-payment. In such circumstances, invocation of the statutory provision enabling waiver of penalty was justified.

Conclusion: The penalties were set aside.

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