Pre-notice payment of service tax shortfall barred penalty under Section 76, as the statutory protection applied.

Where the service tax shortfall was paid before issuance of the show cause notice, Section 73(3) of the Finance Act, 1994 applied and relieved the assessee from further litigation on that demand. On that footing, the foundation for penal proceedings did not survive, because the shortfall had already been made good before notice. Penalty under Section 76 was therefore held to be not sustainable, and the appeal succeeded.

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Issues: Whether, after payment of the service tax shortfall before issuance of the show cause notice, penalty under Section 76 of the Finance Act, 1994 could still be imposed.

Analysis: Section 73(3) of the Finance Act, 1994 relieves an assessee from litigation where the shortfall in service tax is paid before issuance of notice. Since the shortfall had already been paid, the statutory condition for proceeding without notice was attracted and the basis for penal action did not survive.

Conclusion: Penalty under Section 76 of the Finance Act, 1994 was not sustainable, and the appeal succeeded.

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