2015 (1) TMI 1282 - HC - Service Tax

Demand of interest and penalty - Deposit made in erroneous account - self-assessment of service tax - Petitioner contended that since the tax has been deposited in due time and the money remained in the suspense account without being credited to the appropriate account by reason of the mistaken code indicated in the documents, no prejudice has been suffered by the department or the revenue and the petitioner should not be visited with any penalty or claim on account of interest - Held that - since it is open to the petitioner to make a representation to the appropriate Commissioner and it is evident that the perceived non-payment of the service tax for the relevant year will result in the matter travelling to the Commissioner, the present writ petition is disposed of by leaving the Commissioner free to take an appropriate decision upon the matter, whether on the petitioner s representation or otherwise, by having due regard to the nature of the error, the fact that the money remained in the suspense account and earned interest to the Revenue and that there may not have been any mala fides on the part of the petitioner. - Petition disposed of

Summary

Issues:
1. Incorrect deposit of service tax leading to possible interest and penalty.
2. System design and error prevention in tax filing.
3. Prejudice suffered by the department due to the mistaken code in tax documents.
4. Representation to the Commissioner for resolution.
5. Decision on penalty and interest based on error nature and absence of mala fides.

Analysis:
The petitioner raised a grievance regarding the incorrect deposit of service tax for the financial year, which might result in facing interest and penalty. Initially, it was suggested that the mistake was related to a unique identification number. The department clarified that the system is designed to prevent progress in e-filing if an erroneous code is entered. The petitioner argued that since the tax was deposited on time but remained in a suspense account due to the mistaken code, no prejudice was caused to the department or revenue. Therefore, the petitioner requested no penalty or interest claim.

The court noted that the petitioner could make a representation to the appropriate Commissioner. The court disposed of the case, allowing the Commissioner to decide on the matter, considering factors such as the nature of the error, the money earning interest in the suspense account, and the absence of any mala fides on the petitioner's part. The decision on penalty and interest was left to the Commissioner based on the circumstances of the case.

Overall, the court emphasized the importance of addressing the error in the tax filing process and ensuring that the petitioner's case is reviewed fairly by the Commissioner. No costs were awarded in this case, and certified copies of the order were made available to the parties upon request.