2014 (8) TMI 448 - AT - Service Tax

Levy of interest and penalty - delay in payment of tax - Delay due to change in constitution of the entity from a Government department to a Public Limited Company - Held that - As per the section, interest is payable for delay in payment of tax payable under Section 68 and Rules made thereunder. So the delay is to be calculated from the date on which tax was due to the date on which tax was paid - appellant had not put in place system by which tax is due for each month and no reasonable cause is adduced for such failure for prolonged period. So the appellants are liable to penalty under Section 76 - Decided against assessee.

Summary

Issues:
1. Liability for service tax payment through TR-6 challans.
2. Determination of interest and penalty under Sections 75 and 76 of the Finance Act, 1994.
3. Applicability of penalty for delay in payment of tax.

Analysis:
1. The appellant, a Public Limited Company previously part of the Ministry of Telecommunications, faced a Show Cause Notice for non-payment of service tax through TR-6 challans. The adjudicating authority confirmed a short payment of &8377; 6,53,055/- along with interest and penalty. The appellant argued that the tax liability was determined late and requested the interest and penalty to be set aside.

2. The Revenue argued that interest under Section 75 is payable for the period of delay in tax payment, calculated from the due date. The appellant's failure to correctly determine and pay the interest was highlighted. The Revenue contended that penalty under Section 76 applies for delay in payment, emphasizing that the appellant's transition to a Public Limited Company did not absolve them from penalty liability.

3. The Tribunal upheld the interest and penalty imposed, citing Section 75 of the Finance Act for interest calculation based on the due date of tax payment. The Tribunal noted the appellant's lack of a system to determine monthly tax liabilities and found no reasonable cause for the prolonged failure. Consequently, the appeal was dismissed, affirming the liability for interest and penalty under Sections 75 and 76.

This judgment clarifies the legal obligations regarding service tax payment, interest calculation, and penalty imposition under the Finance Act, emphasizing the due date for tax payment as crucial for interest calculation and holding entities accountable for establishing systems to ensure timely tax payments.