Penalty under section 78 fails where voluntary disclosure and SVLDRS invocation negate intent to evade.

Penalty under section 78 of the Finance Act, 1994 was held unsustainable where service tax liability on intermediary service was not disputed and the demand, along with penalty under section 77, was sustained. The decisive question was whether the facts showed deliberate suppression or intent to evade. Voluntary disclosure by the assessee during investigation, followed by invocation of the SVLDRS scheme on the same issue, negatived any inference of contumacious conduct. On that basis, the penalty under section 78 was set aside.

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Issues: Whether penalty under section 78 of the Finance Act, 1994 was leviable in the facts of the case.

Analysis: The liability to service tax on the intermediary service was not in dispute, and the demand as well as penalty under section 77 were sustained. The only surviving question was whether the facts disclosed any deliberate suppression or intent to evade so as to justify penalty under section 78. The record showed voluntary disclosure by the appellant during investigation and subsequent invocation of the SVLDRS scheme on the same issue, which negatived any inference of contumacious conduct.

Conclusion: Penalty under section 78 was not sustainable and was set aside in favour of the assessee.

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