2011 (7) TMI 567 - AT - Service Tax

Waiver of pre-deposit - Banking and other Financial Services - short payments - Show-cause notice proposing to demand applicable rate of interest on the delayed payment and proposing to impose penalty was issued to the assessees - adjudicating authority confirmed the interest demand but dropped the penal proceedings - Held that - Commissioner (Appeals) was satisfied after considering the documents filed by the assessees of the remittance of interest by them even prior to the issue of SCN but this was not taken into account by the adjudicating authority - Since the interest amount stood paid, and such payment was accepted by the Commissioner (Appeals), he had only to set aside the demand of interest confirmed by the adjudication order - Decided in favour of assessee.

Summary

Issues:
1. Waiver of predeposit of demand of interest
2. Short payment of tax by assessees
3. Show-cause notice for interest demand and penalty
4. Adjudication by the authority
5. Commissioner (Appeals) decision
6. Payment of interest by assessees
7. Appeal decision

Analysis:
1. The Hon'ble Ms. JYOTI BALASUNDARAM, Vice-President, waived the predeposit of demand of interest amounting to Rs.80,469 and proceeded to decide the appeal with the consent of both parties. This decision allowed for the appeal to be heard without the need for immediate payment of the interest demanded.

2. The assessees, engaged in providing "Banking and other Financial Services," had initially short paid tax, which was rectified by making up the short payments in August and September 2006. This act of short payment led to a show-cause notice being issued, proposing the demand of applicable interest on the delayed payment and the imposition of a penalty.

3. The adjudicating authority confirmed the interest demand but decided to drop the penal proceedings. Subsequently, the Commissioner (Appeals) reviewed the case and found satisfaction in the documents provided by the assessees regarding the remittance of interest even before the issuance of the show-cause notice. However, the adjudicating authority did not consider this information and upheld the demand for interest despite the payment being made.

4. The Vice-President noted that the interest amount had been paid by the assessees and accepted by the Commissioner (Appeals), indicating that the payment was in order. Given this, the Vice-President concluded that the adjudicating authority should have set aside the demand for interest, as the payment had already been made and accepted.

5. In light of the circumstances and the satisfaction regarding the payment of interest, as evidenced by the challan dated 5.1.2007, the Vice-President decided to set aside the impugned order and allowed the appeal, thereby ruling in favor of the assessees.

6. The judgment was dictated and pronounced in open court, finalizing the decision to set aside the demand for interest confirmed by the adjudication order, based on the payment made by the assessees and accepted by the Commissioner (Appeals).