Service tax penalty waiver follows when tax and interest are paid before notice and leniency is justified.

Penalties for delayed service tax payment may be waived where the tax and interest for the relevant period were already discharged before issuance of the show cause notice. Prior payment of dues was treated as a relevant mitigating factor, and in the stated circumstances the assessee was relieved of penal consequences. The penalty demand was therefore not sustained.

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Issues: Whether the penalties imposed for delayed payment of service tax were liable to be waived where the tax and interest had already been paid before issuance of the show cause notices.

Analysis: The entire service tax for the relevant period had been discharged along with interest. The dispute survived only on the question of penalty. In the peculiar facts and circumstances, the prior payment of dues weighed in favour of relieving the assessee from penal consequences.

Conclusion: The penalties were waived.

Final Conclusion: The appeals were allowed and the penalty demand did not survive.

Ratio Decidendi: Where service tax and interest are paid before issuance of the show cause notice and the circumstances justify leniency, the penalty may be waived.

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