Bona fide belief did not excuse non-payment of service tax; deliberate withholding of a known liability attracted penalty.

Penalty was justified for non-payment of service tax on manpower recruitment services once the levy became applicable. A taxpayer could challenge the levy and pursue legal remedies, but could not simply withhold payment on the expectation that the levy might later be withdrawn. Deliberate non-payment of a known tax liability, even if supported by a belief that representations would succeed, did not amount to bona fide belief, good faith, or reasonable cause. On that basis, the penalty was upheld and no reduction was warranted.

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Issues: Whether penalty was justified for non-payment of service tax on manpower recruitment services on the plea of bona fide belief and reasonable cause.

Analysis: The liability to pay service tax had commenced when the levy was extended to manpower recruiting agencies. The appellants were free to protest and pursue legal remedies, but they could not withhold payment merely because they expected the levy to be withdrawn. A deliberate choice not to pay a known tax liability, based on the hope that representations would succeed, did not amount to good faith or reasonable cause. The plea that the default was motivated by a moral objection was also absent.

Conclusion: Penalty was upheld and no reduction was warranted.

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