Bona fide belief and reasonable cause justify waiver of service tax penalty while demand and interest remain intact.

Penalty under the service tax law was set aside where the assessee had registered, filed ST-3 returns and discharged tax on the amount retained, and the record showed no suppression of facts or intent to evade. On those facts, bona fide belief and reasonable cause justified waiver of penalty under the statutory relief provision. The confirmed demand and interest were left undisturbed, so relief was confined to the penal portion only.

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Issues: Whether penalties imposed under the service tax law were liable to be set aside on the ground of bona fide belief and reasonable cause, without disturbing the confirmed demand and interest.

Analysis: The appellants had registered themselves, filed ST-3 returns, and discharged service tax on the amount retained by them. The dispute was confined to penalties. The record showed no specific evidence supporting the higher taxable collection alleged by the department, and the show cause notice did not allege suppression of facts. In the circumstances, and following the principle that an intermediary cable operator acting under a bona fide understanding of non-liability can claim protection from penalty, the case fell within the scope of waiver under Section 80 of the Finance Act, 1994.

Conclusion: The penalties were set aside, while the confirmed demand and interest were left undisturbed.

Final Conclusion: Relief was granted only against the penal portion of the adjudication, with the substantive tax demand and interest maintained.

Ratio Decidendi: Penalty under the service tax law is not sustainable where the assessee establishes bona fide belief and reasonable cause, and the record does not show suppression of facts or intent to evade, warranting invocation of the statutory waiver provision.

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