2013 (6) TMI 711 - AT - Service Tax

Summary

Issues involved: Whether interest is chargeable on advances received by the appellant, whether the demand is time-barred, and whether any penalty is imposable.

Interest on advances: The appeal involved the question of whether interest is chargeable on advances received by the appellant. The Tribunal referred to Section 67 of the Act, which states that service tax is payable on any amount received as consideration for services provided or to be provided. The Tribunal noted that service tax is payable on the advances received in the quarter by the 5th of the month following the quarter. Since the appellants did not pay the tax on advances within the specified time, interest was deemed chargeable from the 5th of the month following the quarter to the date of payment.

Time-barred demand: The Tribunal considered the issue of whether the demand made through the Show Cause Notice was time-barred. The Notice was issued on 27.7.2009, demanding interest for the period January 2007 to March 2008. The appellant argued that the Notice was time-barred and relied on a Tribunal decision in the case of EMCO Ltd. vs. CCE. The Tribunal noted that there is no specific time limit prescribed for demanding interest under Section 75 of the Act. Citing a Supreme Court decision, the Tribunal held that the period of limitation applicable to the principal amount should also apply to the claim for interest. The Commissioner had upheld the extended period based on the appellant's failure to reflect advances in the original returns, which was considered as suppression. However, the Tribunal found that the Show Cause Notice was served after the appellant filed a revised return that included the advances, and therefore, the extended period was not justified. Consequently, the Tribunal held that the Show Cause Notice was time-barred, and as the demand was not sustainable on the limitation, there was no basis for imposing a penalty.

Decision: The Tribunal allowed the appeal in favor of the appellant, concluding that interest on advances was chargeable but the demand was time-barred, leading to the dismissal of the penalty.