Voluntary tax compliance and absence of mens rea defeat penalty; disputed interest computation was remitted for fresh calculation.

Voluntary registration and discharge of service tax after realising liability, coupled with deposit of the tax collected and failure to claim available abatement, showed bona fide conduct and absence of mens rea; penalty was therefore not warranted. The interest component, however, required proper period-wise computation, so the matter was remitted for fresh calculation by the adjudicating authority.

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Issues: (i) whether penalty was leviable where the assessee took registration on its own and discharged service tax after realizing the liability; (ii) whether the interest payable required fresh calculation by the adjudicating authority.

Issue (i): whether penalty was leviable where the assessee took registration on its own and discharged service tax after realizing the liability.

Analysis: The assessee had voluntarily obtained registration in 2006 and commenced payment of service tax. The service involved was eligible for 50% abatement under Notification No. 20/2004-S.T. dated 10.09.2004, but no such abatement had been claimed, which supported the bona fide nature of the conduct. The tax amount collected from the recipient had already been deposited with the Department. In these circumstances, absence of mens rea was evident and penalty was not justified.

Conclusion: Penalty was not imposable on the assessee.

Issue (ii): whether the interest payable required fresh calculation by the adjudicating authority.

Analysis: The assessee disputed the manner of computation of interest and indicated willingness to pay the correct amount. Since the interest required proper working out period-wise, the matter had to be sent back for recalculation.

Conclusion: The issue of interest was remanded to the adjudicating authority for fresh calculation.

Final Conclusion: The demand of penalty did not survive, while the question of interest liability was sent back only for limited recomputation and compliance.

Ratio Decidendi: Where an assessee voluntarily registers and pays service tax on realizing the liability, and the surrounding facts establish bona fide conduct without mens rea, penalty is not warranted; a disputed interest computation may be remitted for fresh determination.

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