Penalty not payable when tax discharged

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that where an assessee voluntarily discharges service tax liability along with applicable interest prior to the issuance of a show cause notice and duly intimates the Department, the protection available under Section 73(3) of the Finance Act, 1994 becomes operative. 

In such circumstances, initiation of penalty proceedings is impermissible and the benefit of Section 80 cannot be denied. Accordingly, the Tribunal set aside the penalty imposed under Section 78 while leaving the tax and interest components undisturbed.