Service tax penalty relief follows timely payment of tax, interest, and part penalty under the Finance Act, 1994.

Where service tax, interest, and 25% of the penalty under Section 78(1) were paid within the stipulated period, the basis for sustaining further penal consequences did not survive. The amounts already paid were to be adjusted against the tax liability, and the penalties imposed under Section 77 and Section 78(1) of the Finance Act, 1994 were set aside.

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Issues: Whether the penalties imposed under Section 77 and Section 78(1) of the Finance Act, 1994 were sustainable after payment of the service tax, interest, and 25% of the penalty.

Analysis: The appellants had discharged the service tax liability, paid interest, and also paid 25% of the penalty imposed under Section 78(1) within the stipulated period. In these circumstances, the basis for continuing the penal consequences did not survive, and the amounts already paid were liable to be adjusted against the tax liability.

Conclusion: The penalties imposed under Section 77 of the Finance Act, 1994 and Section 78(1) of the Finance Act, 1994 were set aside.

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