Bona fide belief defeats section 76 penalty where service tax was unpaid without wilful intent to evade

Penalty under section 76 is not warranted where non-payment of service tax arose from a bona fide belief that no liability existed and there was no wilful intent to evade tax. The assessee, a cooperative society of ex-servicemen, relied on the prevailing view and advice that only a commercial concern was liable during the relevant period. The record showed no deliberate suppression or evasion, and the discretionary setting aside of penalties was upheld as free from infirmity.

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Issues: Whether penalty under section 76 could be sustained when the assessee had not paid service tax during the relevant period under a bona fide belief that no liability attached to it and there was no wilful intention to evade tax.

Analysis: The assessee was a cooperative society of ex-servicemen and had proceeded on a bona fide understanding, based on the prevailing view and advice received, that only a commercial concern was liable to service tax during the relevant period. The record showed absence of deliberate suppression or wilful evasion. The authority below had accepted this explanation and exercised discretion to set aside the penalties, and no infirmity was found in that approach.

Conclusion: Penalty was not sustainable and was rightly set aside.

Ratio Decidendi: Where non-payment of service tax during the relevant period is attributable to a bona fide belief and there is no wilful intention to evade tax, penalty under section 76 is not warranted.

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