2015 (1) TMI 458 - AT - Service Tax

Demand on interest and penalty on late payment of service tax - Revenue neutral exercise - availability of cenvat credit - reverse charge mechanism - Held that - Simply because a situation leads to revenue neutrality does not imply that tax need not be paid on time. When law requires tax to be paid it has to be paid as per time specified. The Ld. Counsel has relied on the case of Reliance Industries (2014 (1) TMI 52 - CESTAT AHMEDABAD) to say that interest is not demandable. I note that this case refers to situation where the question of payment of duty on intermediate products was the issue. In the facts of the present case, it is clear that the tax has been paid much later than the date on which it was due. The time to be considered for interest purposes is this time between the due date and the payment day. It cannot be said that the Government has not lost interest between the two dates, notwithstanding the fact that Cenvat Credit could have been availed on the same date if duty had been paid on time. This aspect was not considered in the citations referred. I hold that interest is payable under Sections 75 of the Finance Act. - Although the appellants are paying regularly service tax regularly, two transactions were missed due to oversight and tax could not be paid in respect of these two transactions. Intention to evade payment of duty is not established when clearly the appellants are eligible for taking Cenvat Credit as soon as duty is paid by them. The case of Patel Alloys Pvt. Ltd. (2013 (12) TMI 167 - CESTAT AHMEDABAD) supports this case. - Interest is payable; however penalties are set aside - Decided partly in favour of assesse.

Summary

Issues:
Appeal against demand of service tax, interest, and penalties under Sections 77 & 78 of the Finance Act, 1994.

Analysis:
1. Service Tax Demand: The appellants had not paid the required service tax for March 2008 and March 2009, which was paid later on 1st October 2009. The Ld. Counsel agreed to pay the service tax demand as it would be revenue neutral, but disputed the demand of interest and penalties. The Tribunal judgment in the case of Reliance Industries Ltd. was cited to support the argument against interest payment in a revenue-neutral situation. However, the judge noted that simply achieving revenue neutrality does not exempt the appellants from paying tax on time as required by law. The judge held that interest is payable under Sections 75 of the Finance Act due to the delay in payment.

2. Interest Payment: The Ld. A.R. emphasized that payment of interest is a civil liability and referred to the judgment of the Hon'ble Mumbai High Court in the case of M/s. Vikhe Patil SSK. Ltd. The onus was on the appellant to prove no intention to evade duty payment. The judge considered the time between the due date and the actual payment date for interest calculation, stating that the government had indeed lost interest during this period. The judge concluded that interest is payable as per the Finance Act.

3. Penalties: The Ld. Counsel argued that penalties should not be imposed, citing a similar case involving a group company where penalties were set aside. The appellants, despite missing two transactions due to oversight, were regularly paying service tax. The judge noted that the intention to evade payment of duty was not established, especially considering the appellants' eligibility to take Cenvat Credit once the duty is paid. Relying on the case of Patel Alloys Pvt. Ltd., the judge set aside the penalties while affirming the payment of interest.

4. Judgment: The appeal was disposed of with the decision that interest is payable due to the delayed tax payment, but penalties were set aside considering the circumstances of the case. The judge's decision was based on the legal provisions and precedents cited during the proceedings.