2016 (1) TMI 345 - AT - Service Tax

Demand of Interest beyond the scope of Show Cause Notice - appellant contended that show cause notice issued only for demanding service tax of amount of ₹ 2,40,780/- though the Order-in-original has appropriated an amount of ₹ 5,10,895/-, the interest cannot be demanded beyond the demand proposed in the show cause notice ie. ₹ 2,40,780/- and submits that the order demanding interest travels beyond the show cause notice - Held that - It is seen that the recovery of interest of the entire service tax amount of ₹ 5,10,895/- was not covered in the SCN issued. The adjudicating authority has travelled beyond the SCN. Since he has appropriated the entire of amount of service tax, recovery of interest on the entire amount of service tax of ₹ 5,10,895/- is not covered under Section 73 (2) of the Finance Act, 1994. Hence, the appellant is required to pay the interest on the amount demanded in the show cause notice and confirmed by the adjudicating authority. Accordingly, the appeal is allowed. - Decided in favor of assessee.

Summary

Issues:
1. Demand of service tax amount and interest beyond the show cause notice.
2. Liability to pay interest on the entire service tax amount paid by the assessee.
3. Appropriation of service tax amount and recovery of interest beyond the scope of the show cause notice.

Analysis:
1. The case involved a demand for service tax of Rs. 2,40,780 along with interest and penalty issued to the appellants engaged in various services. The adjudicating authority confirmed the demand and appropriated a higher amount paid by the assessee for the period 2008-2009, leading to a dispute regarding the interest demanded beyond the show cause notice amount. The Commissioner (Appeals) upheld the order based on the entire service tax amount paid by the assessee, which was beyond the original demand.

2. The appellant contended that interest should only be payable on the amount mentioned in the show cause notice, as the additional service tax amount was paid voluntarily without a separate notice. The argument was supported by legal precedents highlighting the necessity for interest to correspond with the demand specified in the notice. On the other hand, the Revenue argued that payment of service tax automatically triggers interest accrual, irrespective of the specific amount mentioned in the notice.

3. The Tribunal analyzed the submissions and found that the adjudicating authority had exceeded the scope of the show cause notice by demanding interest on the entire service tax amount paid. The Tribunal ruled that recovery of interest beyond the amount specified in the notice was not justified under Section 73(2) of the Finance Act, 1994. Consequently, the appellant was held liable to pay interest only on the amount mentioned in the show cause notice, leading to the allowance of the appeal.

This judgment clarified the principles governing the liability for interest on service tax payments and emphasized the importance of adhering to the specifics of show cause notices in tax adjudications.