2019 (2) TMI 1492 - AT - Service Tax

Interest on delayed payment - case of appellant is that no demand has been raised in the show cause notice and there cannot be interest demand without any demand raised for the tax amount - Held that - It is not disputed that the appellant admitted its liability of Service Tax on the amount over and above the MGM and paid the same before the issuance of show cause notice and due to which the show cause notice was issued for demand of interest only and confirmation of demand and Service Tax and appropriation of the amount paid as Service Tax was not warranted. Admittedly, there is delay in payment of Service Tax and once the duty is admitted, interest cannot be detached from the duty liability. The liability to pay interest arises when the assessee is liable to pay duty on the day which is prescribed but failed to pay the same. The liability to pay interest arises from the date, the duty is payable till the date it is paid. By such late payment or delayed payment, the Revenue is deprived of the duty. The said amount would be in possession of the assessee who would have the benefit of the said amount - It is to compensate the loss sustained by the Revenue, the interest is imposed and, therefore, the interest is payable for the period during which the Revenue is deprived of the duty, which it was legitimately entitle to and since the assessee had the benefit of the duty by not paying the duty payable on the due late. It is compensatory in nature and is imposed on the assessee who has withheld payment of any tax as and when it is due and payable. The SCN and the orders of the authorities below invoking the provision of Section 75 ibid for demanding interest is perfectly in order and is within the framework of law - Appeal dismissed.

Summary

Issues:
Liability to pay interest on delayed payment of Service Tax.

Analysis:
The appeal was filed against the order passed by the Commissioner regarding the liability to pay interest on delayed payment of Service Tax. The appellant had given space in their malls to retailors/persons who entered into Minimum Guarantee agreements, paying a fixed percentage of sales or a Minimum Guarantee Money (MGM). The appellant paid Service Tax under "Business Auxiliary Service" for MGM but not for the additional income received from those who achieved target sales. After an audit, the Appellant paid the Service Tax amount but without interest and penalty. A show cause cum demand notice was issued for recovery of interest and imposition of penalties.

The adjudicating authority confirmed the interest demand and imposed a penalty. On appeal, the interest liability was reduced, and the penalty was dropped. The appellant challenged the interest liability only, not the Service Tax liability already paid. The appellant argued that no demand was raised for the tax amount in the show cause notice, and interest cannot be demanded without a tax demand. The revenue contended that interest is payable for delayed payment despite the Service Tax being paid before the notice.

The Tribunal referred to relevant rules stating that delayed payment of Service Tax attracts interest. The appellant's argument that no interest should be imposed due to unutilized CENVAT credit was rejected. The Tribunal cited a Supreme Court case emphasizing that interest is payable if duty is admitted but not paid on time, compensating the Revenue for the loss due to delayed payment. Therefore, the show cause notice demanding interest was deemed valid within the legal framework.

In conclusion, the appeal was rejected, upholding the liability to pay interest on delayed payment of Service Tax.