2005 (3) TMI 6 - AT - Service Tax

Summary

Issues:
1. Demand of interest on finalization of provisional assessment for the period prior to 1-7-2001 in relation to service tax.
2. Interpretation of the word 'ordered' in Supplemental Instructions issued by the Board.
3. Applicability of interest clause introduced on and from 1-7-2001 to provisional assessments continued after the amendment.

Issue 1 - Demand of Interest on Finalization of Provisional Assessment:
The case involved a dispute regarding the demand of interest on the finalization of provisional assessment for the period prior to 1-7-2001 in the context of service tax. The respondent argued that there was no statutory provision allowing for the imposition of interest on finalization of provisional assessment before 1-7-2001. The Commissioner (Appeals) set aside the demand for interest for the period before the mentioned date. The Revenue appealed, contending that the charging of interest should apply to provisional assessments continued after the amendment to avoid unequal treatment. However, the Tribunal held that since the interest clause was introduced only from 1-7-2001, demanding interest for a provisional assessment ordered before that date was illegal. The Tribunal upheld the Commissioner's decision, rejecting the Revenue's appeal.

Issue 2 - Interpretation of the Word 'Ordered' in Supplemental Instructions:
The Revenue argued that the Commissioner (Appeals) misinterpreted the word 'ordered' in the Supplemental Instructions issued by the Board, which, according to them, would defeat the purpose of the interest clause introduced from 1-7-2001. The Tribunal, after reviewing the case records, found that the introduction of the interest clause was indeed effective only from 1-7-2001. Therefore, demanding interest for a provisional assessment ordered prior to that date was deemed illegal. The Tribunal concluded that the Commissioner's interpretation was correct, and the Revenue's appeal was devoid of merit.

Issue 3 - Applicability of Interest Clause Introduced from 1-7-2001:
The Revenue contended that the interest provisions should apply to provisional assessments continued after the amendment to ensure consistency and avoid unequal treatment. However, the Tribunal emphasized that the interest clause was introduced for the first time from 1-7-2001 and, therefore, could not be applied to provisional assessments ordered before that date. The Tribunal upheld the legality of the Commissioner's decision to set aside the demand for interest for the period prior to 1-7-2001. Consequently, the Revenue's appeal was rejected, affirming the Commissioner's order.