Prior payment of service tax and interest before show cause notice bars penalty under service tax law.

Where service tax and interest are paid before issuance of the show cause notice, penalty is not sustainable under service tax law. The dispute was confined to penalty because the tax liability had already been discharged voluntarily with interest before notice, and the consistent view applied in similar matters was that such prior payment removes the basis for penal action. Penalty was therefore held not leviable, and the appeal succeeded with the penalty set aside.

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Issues: Whether penalty under service tax law was leviable when the appellant discharged the tax liability along with interest before issuance of the show cause notice.

Analysis: The appellant paid the service tax dues with interest on its own before the show cause notice was issued. The dispute was confined to penalty, and the consistent view followed in similar cases was that once the tax and interest stand paid before notice, penalty is not warranted.

Conclusion: Penalty was held not leviable.

Final Conclusion: The appeal succeeded and the penalty was set aside.

Ratio Decidendi: Where service tax and interest are paid before issuance of the show cause notice, penalty is not sustainable.

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