2018 (12) TMI 870 - AT - Service Tax

Adjustment of advance received with the excess available during March, 2006 and March, 2007 - finalization of provisional assessment - Held that - The scope of provisional assessment and the tax paid in terms of the same is always taken note while passing the final assessment Order. If the duty paid as per provisional assessment is less than the duty payable after final assessment, then the assessee is liable to make good the balance along with interest on the shortfall. The Hon ble High Court of Karnataka in the case of M/s. Toyota Kirloskar Auto Parts Pvt. Ltd. 2011 (10) TMI 201 - KARNATAKA HIGH COURT , has considered this aspect and after considering the rival contentions and the relevant provisions of law, has held Even though the duty payable under the Act is to be calculated under each head of each case ultimately it is the total duty payable for all the goods which are the subject matter of the provisional assessment and final assessment which is to be taken into consideration. The appellant is correct in its assertion that there was no shortfall and no interest liability since the shortfall of ₹ 47,44,656/- was for 2006-07 - service tax paid subsequently/belatedly attracts interest, which is for the year 2006-07 alone - there was no interest liability for March, 2006 i.e., for 2005-06. Appeal allowed in part.

Summary

Issues:
Appeal against Order-in-Appeal sustaining demand of interest on tax amounts received as advance/deposits for services provided.

Analysis:
The appellant contended that the tax liability on premium received in advance was covered by excess remittances and unutilized input credit. The Revenue demanded interest due to advances received in March 2008, as provisional assessments for 2006-07 and 2007-08 were finalized. The appellant argued against interest liability, citing sufficient credit available. The adjudicating authority accepted interest payment under protest. The first appellate authority upheld interest liability, noting non-disclosure of bill receipts for March 2006 and March 2007.

During the hearing, the appellant referenced a Karnataka High Court decision to support their argument of available adjustments. The Revenue argued that interest is justified for late tax deposits, especially for March liabilities. The Tribunal reviewed the contentions, documents, and the Karnataka High Court decision. The Court emphasized the importance of balancing duty payments after final assessment and excess payments made. It concluded that interest should not be levied when no duty shortfall exists, aligning with the Karnataka High Court's rationale.

The Tribunal found merit in the appellant's claim that no interest liability existed for March 2006 (2005-06) due to available credits. The appellant's admission of delay in tax remittance for 2006-07 led to a revised interest calculation. The Tribunal agreed with the first appellate authority that belatedly paid service tax attracts interest only for 2006-07. Consequently, the appeal was partially allowed based on the above considerations. The decision was pronounced in open court on 05.12.2018.