Penalty for service tax default on reverse charge basis was rejected where voluntary payment showed bona fides and no intent to evade tax.

Penalty under Section 78 of the Finance Act, 1994 was held not leviable for non-payment of service tax on reverse charge basis in respect of payments to non-resident financial institutions. Voluntary payment of the tax and interest, including discharge of tax for an earlier period, was treated as evidence of bona fides and was not enough, by itself, to prove fraud, collusion, wilful misstatement, suppression of facts, or intent to evade tax. The Tribunal's assessment of the assessee's conduct was treated as a finding of fact, and no ground was found to interfere with that conclusion.

---

---

Issues: Whether penalty under Section 78 of the Finance Act, 1994 was leviable on the assessee for non-payment of service tax on reverse charge basis for payments made to non-resident financial institutions.

Analysis: The assessee paid the service tax and interest, and even discharged tax for the earlier period to demonstrate bona fides. The Court held that such voluntary payment and non-contest of the tax demand could not, by themselves, establish fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade tax. The Tribunal's appreciation of the assessee's conduct was treated as a finding of fact, and no basis was found to interfere with that conclusion.

Conclusion: Penalty under Section 78 was not leviable and the assessee succeeded on that issue.

---