Service tax non-remittance supports penalty under Section 78, and later payment does not by itself remove liability.

Collection of service tax from customers without remittance to the Government was treated as evidence of intention to evade tax, supporting penalty under Section 78 of the Finance Act, 1994. Subsequent payment of the tax and interest did not by itself remove the penalty exposure, and the plea for reduced penalty was rejected. The appellate challenge failed because no infirmity was found in the lower authority's conclusion that the non-remittance justified penal action, leaving the original order undisturbed.

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Issues: Whether penalty under Section 78 of the Finance Act, 1994 was sustainable where service tax had been collected from customers but not deposited with the Government, and whether the assessee was entitled to the benefit of reduced penalty.

Analysis: The service tax had been collected from customers and was not remitted to the Government treasury, which was treated as indicating an intention to evade tax. Subsequent payment of the tax and interest did not erase the liability to penalty. In the absence of any infirmity in the findings of the lower authority, the appellate challenge to the penalty was not accepted.

Conclusion: Penalty under Section 78 was upheld and the claim for interference or reduction was rejected.

Final Conclusion: The appeal failed on the penalty issue and the impugned order was left undisturbed.

Ratio Decidendi: Collection of service tax without remittance to the exchequer supports a finding of evasion warranting penalty under Section 78, and subsequent payment does not by itself negate such liability.

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