Reasonable cause and prior tax payment defeated service tax penalty where no intentional evasion was shown.

Penalty under the service tax law was deleted because the tax had already been paid before issuance of the show cause notice, the assessee showed reasonable cause, and no positive act of intentional evasion was established. On those facts, the penalty provisions and the waiver principle for reasonable cause were applied to hold that penalty could not be sustained. The appeal succeeded only to the extent of deletion of penalty, and the demand portion was not examined further.

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Issues: Whether penalty under the service tax law was imposable when the tax amount had been paid before issuance of the show cause notice and the assessee asserted reasonable cause.

Analysis: The amount confirmed against the assessee had already been deposited before the show cause notice was issued. The disputed appeal was confined to the penalty. In the absence of evidence showing any positive act of intentional evasion, and in view of the assessee's explanation of inadvertence, the conditions for penalty were not satisfied. The provisions governing penalty and waiver for reasonable cause were applied to hold that penalty could not be sustained.

Conclusion: Penalty was held not imposable and the penalty order was set aside.

Final Conclusion: The appeal succeeded only to the extent of deletion of penalty, while the demand portion was not examined further.

Ratio Decidendi: Where the service tax liability is discharged before issuance of the show cause notice and no intentional evasion is established, penalty is not leviable if reasonable cause is shown.

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