2018 (2) TMI 484 - AT - Service Tax

Liability of interest - short payment of service tax - Section 75 of the Finance Act, 1994 - Held that - the appellant had filed returns during the relevant period in question, which would mean that there was no suppression of the fact but due to a human error, the short payment of tax was done - in case of appellant itself, in G M (Telecom), BSNL Vs CCE Chandigarh 2003 (6) TMI 6 - CESTAT, NEW DELHI , the Tribunal has held that appellant being Central Government Department, interest liability cannot be pertained. The case is hand, the appellant cannot be burdened with interest liability as the short payment of duty was made good immediately - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Demand of interest from the appellant regarding service tax liability.

Analysis:
The appeal was against an order-in-appeal dated 06.06.2017. The issue involved was the demand of interest from the appellant, a Government of India undertaking, for a service tax liability of ?1.60 Crores. The appellant had initially deposited ?1.16 Crores on 05.07.2011, but a subsequent audit revealed a shortfall of ?44 lakhs, which was immediately rectified. However, the interest liability was not discharged. A Show Cause Notice dated 23.07.2014 was issued for the interest demand. The Adjudicating Authority confirmed the demand of the short payment and interest without imposing any penalty. The appellant contested this before the First Appellate Authority, arguing that the interest demand was time-barred and incorrect. The First Appellate Authority upheld the interest demand, citing Section 75 of the Finance Act, 1994 as mandatory for interest payment on shortfalls.

Upon careful consideration, it was found that the appellant's challenge to the interest demand was based on the grounds of limitation. The Show Cause Notice was issued in 2014, while the short payment was rectified in December 2011. Both the Adjudicating Authority and the First Appellate Authority noted the absence of any malafide intention by the appellant for the shortfall, leading to no penalties being imposed. The appellant argued that in the absence of any allegation of suppression of facts, interest liability cannot be imposed when there is no malafide intent. The appellant had filed returns during the relevant period, indicating no suppression but a human error in the tax payment. Previous case law, including the decision in Kohler India Corporation Pvt. Ltd. Vs CCE Bharuch, supported the appellant's position. Furthermore, in the case of G M (Telecom), BSNL Vs CCE Chandigarh, it was held that interest liability cannot be imposed on a Central Government Department if proper procedures were followed. Given that the shortfall was rectified promptly, the appellant could not be burdened with interest liability.

Therefore, the impugned order was set aside, and the appeal was allowed. The decision was pronounced in open court on 09.01.2018.