2016 (9) TMI 239 - AT - Service Tax

Demand of interest - Section 75 of the Finance Act, 1994 - construction service in respect of commercial or industrial building or civil structures discharge of service tax when demanded as ascertained by himself failure to pay interest on demand SCN for the demand of interest Held that - provisions of Section 75 would apply even in the case wherein an assessee deposits service tax liability on his own ascertainment and there is no need to issue any show cause notice to an assessee for the demand of the interest as in the case in hand - the appellant himself should have calculated and paid the interest on service tax amount, ascertained by him. Imposition of penalties - Section 77(2) and Section 76 of the Finance Act, 1994 Held that - the first appellate authority has already extended the possible relief under the law to the appellant by reducing the penalty imposable under section 76. No further relief granted penalty imposed under section 77(2) of the Finance Act, 1994.

Summary

Issues:
- Whether interest can be demanded under Section 75 of the Finance Act, 1994 for service tax liability discharged by the appellant on their own?
- Whether penalties can be imposed under Section 77(2) and Section 76 of the Finance Act, 1994 in the given circumstances?

Analysis:

Issue 1: Interest under Section 75 of the Finance Act, 1994
The case involved the question of whether interest could be demanded under Section 75 of the Finance Act, 1994 for service tax liability discharged by the appellant on their own. The appellant had rendered construction services and paid the service tax liability without any dispute on the computation. The department later reminded the appellant to pay interest, which led to a show cause notice for interest demand and penalties. The appellant argued that the demand was incorrect as there was no formal order confirming the tax liability and no show cause notice for appropriation of the amount paid. The appellant relied on a tribunal decision and a Board's circular to support their case. However, the Tribunal found that the appellant had paid the tax liability without protest, indicating acceptance of the determined amount. The Tribunal held that Section 75 applies even when the taxpayer pays the tax on their own ascertainment, and interest should have been calculated and paid by the appellant.

Issue 2: Penalties under Section 77(2) and Section 76 of the Finance Act, 1994
Regarding penalties under Section 77(2) and Section 76 of the Finance Act, 1994, the first appellate authority had reduced the penalty imposed under Section 76. The Tribunal noted that the appellant had already received relief by the reduction in the penalty. Therefore, the Tribunal upheld the impugned order and rejected the appeal filed by the appellant. The appellant's arguments regarding the non-imposition of interest and penalties were deemed incorrect by the Tribunal, emphasizing that the appellant had paid the tax liability voluntarily without protest and should have calculated and paid the interest themselves.

In conclusion, the Tribunal upheld the order confirming the interest liability and penalties, stating that the appellant's appeal lacked merit on multiple grounds. The Tribunal's decision was based on the appellant's voluntary payment of the tax liability without protest, which led to the conclusion that interest could be demanded under Section 75 and penalties could be imposed under the relevant sections of the Finance Act, 1994.