2004 (12) TMI 7 - AT - Service Tax

Service Tax Interest on belated payment Genuine days of delay are to be considered for interest payment

Summary

Issues:
1. Calculation of interest on delayed service tax payments.
2. Interpretation of Section 75 of the Finance Act, 1994.
3. Applicability of Board's circular on interest calculation.

Analysis:
1. The case involved the appellants making certain service tax payments belatedly with interest calculated at 1.5% per month for the respective periods of delay. The department contended that if any part of the delay in payment for a month spilled over to the next month, the entire subsequent month should be considered as delay. The department raised a demand for differential interest based on this interpretation, which was contested by the appellant citing Section 75 of the Finance Act, 1994. The lower authorities upheld the department's view, leading to this appeal.

2. The appellant argued that the interpretation in the impugned order contradicted the express provisions of Section 75 of the Finance Act, 1994. They referred to a similar provision in the Andhra Pradesh General Sales Tax Act, 1957, and a relevant case law where it was held that interest could only be charged for the actual period of delay and not for the full month. The appellant also pointed out that a circular relied upon by the department was inconsistent with the law and referred to a Supreme Court ruling emphasizing that a circular cannot override established legal principles.

3. The Special Counsel for the department justified the impugned order based on a circular dated 16-11-1998. However, upon careful consideration, the appellate tribunal found that the lower authorities' decision did not align with the mandate of Section 75 of the Finance Act, 1994. Comparing the provision with a similar provision in the Andhra Pradesh General Sales Tax Act and a relevant case law, the tribunal held that interest should only be paid for the actual delay period. The tribunal also clarified that the circular in question did not address the specific issue at hand, rendering it inapplicable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.