Personal penalties for service tax default were unsustainable where the levy was stayed and tax was later paid with interest.

Personal penalties on architects for non-payment of service tax and non-filing of ST-3 returns were held unsustainable where the relevant service tax provisions had been stayed by the Madras High Court. In that setting, the failure to pay tax during the stay period could not be treated as mala fide or as showing culpable intent. The later payment of tax with interest after the stay was vacated further supported the absence of deliberate default. The penalties were therefore set aside.

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Issues: Whether the imposition of personal penalties on architects for non-payment of service tax and non-filing of ST-3 returns was justified when the operation of the service tax provisions had been stayed by the Madras High Court.

Analysis: The appellants had not deposited service tax for certain quarters and had not filed returns, but the operation of the service tax provisions applicable to architects had been stayed by the Madras High Court. In these circumstances, the non-payment could not be treated as mala fide so as to warrant personal penalties. The subsequent deposit of tax with interest after vacation of the stay further supported the absence of culpable intent.

Conclusion: The penalties were not sustainable and were set aside.

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