Penalty on delayed service tax payment upheld despite pre-show-cause payment after departmental inquiry

Penalty remained sustainable where service tax liability was discharged only after departmental inquiry, even if tax and interest were paid before issuance of the show cause notice. The CESTAT relied on settled precedent to reject the appellants' plea that pre-notice payment automatically absolved them from penalty. On that basis, the Tribunal held that the timing of payment did not wipe out penal exposure once departmental proceedings had already been initiated, and the appeal was rejected.

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Issues: Whether the appellants were liable to penalty despite having paid the service tax along with interest before issuance of the show cause notice.

Analysis: The Tribunal noted that the issue had already been settled that penalty is sustainable where tax liability is discharged only after departmental inquiry has been conducted. The appellants' plea that pre-show-cause payment of tax and interest absolved them from penalty was therefore rejected in view of the earlier binding ratio relied upon.

Conclusion: The appellants remained liable to penalty and the appeal was rejected.

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