Voluntary compliance and reasonable cause failed where service tax was paid only after departmental detection during adjudication.

Penalty under the service tax law was sustained where taxable services had been rendered from the relevant date, registration was taken belatedly, and past transactions were not disclosed until pursued by the department. Payment of tax and interest during adjudication, after departmental detection and in stages rather than voluntarily and completely before the show cause notice, was held insufficient to establish bona fide belief or reasonable cause. The assessee therefore could not avoid penal consequences, and interest remained payable on the delayed compliance.

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Issues: Whether penalty under the service tax provisions was sustainable where tax and interest were paid during adjudication and the assessee claimed bona fide belief and prior payment before the show cause notice.

Analysis: The services rendered were admittedly taxable from the relevant date, while registration was obtained much later. The past transactions were not disclosed to the department until the matter was pursued by the authorities. The tax was not paid in a voluntary and complete manner before the show cause notice, but in stages during the adjudication process. In these circumstances, the plea of bona fide belief did not furnish a valid basis to avoid penal consequences, and the assessee's conduct did not attract the benefit of any reasonable cause exemption.

Conclusion: Penalty and interest were rightly sustained, and the appeal failed.

Ratio Decidendi: Payment of service tax and interest after departmental detection, coupled with delayed disclosure of past taxable transactions, does not amount to voluntary compliance sufficient to avoid penalty where no reasonable cause is shown.

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