2018 (2) TMI 286 - AT - Service Tax

Demand of interest - time limitation - whether the extended period of limitation could be invoked for the demand of interest? - Held that - limitation would apply to demand of interest also - with effect from 14.05.2015 a new sub section (1B) has been introduced in Section 73 which says that interest payable on self assessed service tax shall be recovered as per Section 87 of the Act ibid, without service of notice. The period in this case is prior to 14.5.2015 - reliance placed in the case of Hindustan Insecticiedes Ltd. Versus Commissioner Central Excise, LTU 2013 (8) TMI 225 - DELHI HIGH COURT . The demand of interest in hit by limitation - appeal allowed.

Summary

Issues:
1. Demand of interest on non-payment of service tax.
2. Invocation of extended period of limitation for interest demand.
3. Applicability of case laws related to Central Excise law on service tax matters.

Analysis:
1. The case involved a dispute regarding the demand of interest on non-payment of service tax by the Appellant for taxable services provided to a corporation. The Appellant had paid the service tax belatedly but had not paid the interest amount. A show cause notice was issued beyond the normal period of limitation, leading to the appeal against the interest and penalty imposed.

2. The Appellant argued that the extended period of limitation invoked for the interest demand was not sustainable as there was no allegation of suppression of facts against them. The Appellant relied on various case laws, including Hindustan Insecticides Ltd and Commissioner Vs. TVS Whirlpool Ltd, to support their contention. On the other hand, the Respondent contended that the liability to pay interest is automatic and that the limitation under Section 73(1) does not apply to the demand of interest. The Respondent cited a Tribunal decision in the case of CST Vs. Pepsi Cola India Marketing Co. to counter the Appellant's arguments.

3. The key issue for consideration was whether the extended period of limitation could be invoked for the demand of interest. The tribunal observed that there was no evidence of willful suppression of facts by the Appellant. Referring to case laws such as Hindustan Insecticides Ltd and Indian Medical Practitioner’s Co-op Pharmacy & Stores Ltd, the tribunal held that the limitation applicable to the claim of duty should also apply to the claim of interest. The tribunal distinguished the decision in the case of Pepsi Cola India Marketing Co. by highlighting that the limitation should apply to the demand of interest as well. Additionally, the tribunal noted the introduction of a new subsection in Section 73 post the relevant period, emphasizing the application of limitation to interest demands.

4. Ultimately, the tribunal concluded that the demand of interest was hit by limitation and hence not sustainable. The impugned order was set aside, and the appeal was allowed. The decision was pronounced in open court on 02.11.2017.