Pre-deposit waiver for penalty where service tax and interest were paid within the circular timeline, with recovery stayed pending appeal.

Payment of service tax before issue of the show-cause notice, coupled with payment of interest within one month thereafter, was treated as satisfying the conditions in the departmental circular that proceedings under the Finance Act, 1994 would stand concluded. On that basis, a strong prima facie case for complete waiver of pre-deposit was found. The penalty pre-deposit was waived and recovery was stayed pending appeal.

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Issues: Whether the appellants were entitled to waiver of pre-deposit of the penalty and stay of recovery pending appeal in view of the payment pattern and the departmental circular.

Analysis: The application was considered in the light of Circular No. 137/167/2006-Cx.4 dated 03-10-2007, which clarified that proceedings under the Finance Act, 1994 would stand concluded where the service tax and interest were paid within the stipulated period after the show-cause notice. As the tax had been paid before issue of the show-cause notice and the interest was paid within one month thereafter, a strong prima facie case for complete waiver was made out.

Conclusion: The pre-deposit of penalty was waived and recovery was stayed pending the appeal, in favour of the assessee.

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