2019 (3) TMI 347 - HC - Service Tax

Levy of interest u/s 75 of FA - delay occasioned in making such deposit - Relevant period for levy of interest - Circular issued by the Chandigarh Commissionerate, based on which the interest levy was made in the impugned order - Whether the Tribunal was correct in having confirmed the order of the Commissioner levying interest for the entire month in which the delay was caused, without reference to the actual period of delay? - Held that - What has to be noticed is that from 1998 onwards, the rate of interest was to be applied either for every month or part of the month or for the period by which such crediting of the tax or any part thereof is delayed. This indicates that merely on a delay having been occasioned, there can be no levy of interest for the entire month. It has to be confined for the period in which the delay was occasioned ie for every month or part of the month in which the delay was occasioned. Hence, the levy could have been made only for the actual period in which the delay was occasioned, ie the number of days or when exceeding 30 days, a month and the additional delay occasioned again calculated on the basis of days and so on and so forth. In the present case, the levy was made for the entire month, despite the delay being only for certain days spreading over two months, but not exceeding 30 days. We find the said levy to be improper and not sanctioned by the Statute. The aforesaid Circular was in the context of the officers levying interest for two months, when the number of days delayed spread over more than one month. That is, when the payment had to be made on the 25th of the next month, if it is made on the 3rd or 4th of the next subsequent month, the officers used to levy two months' interest, which the Commissionerate found to be not proper; rightly so. The Commissionerate then directed that in such cases, interest should be charged for only one month; which however is not sanctioned by the Statute, which speaks of the period of delay ie the month or part of month in which the delay occurred - The arbitrary levy by the officers was sought to be mitigated by the Circular; which again permitted the levy for a period in excess of that prescribed by the Statute. The Commissionerate cannot issue a Circular against the specific provisions of the Statute. Whether the interest levy could be made on the full amount of tax due when actually a portion of the amount was paid within the due date? - Held that - The interest levy on delay being occasioned can only be on the delayed payments and not on the entire payments due in a particular month. If a portion of the dues have been paid prior to the due date, then necessarily the said portion would be deemed as having been deposited within time and there could be no levy under Section 75 to that portion. If the amounts due have been remitted by the appellant to the DOT before the due date, then there could be no levy of interest. Further, if the delay was occasioned in making such remittance, the delay has to be calculated from the due date upto to the date of remittance to the DOT or the Excise Department, whichever is earlier. The order of the Commissioner and the Tribunal set aside, however, retaining that portion of the Tribunal's order, which interferes with the order of penalty - Commissioner shall rework the entire levy - questions of law are all answered in favour of the assessee and against the Revenue.

Summary

Issues Involved:
Levy of interest under Section 75 of the Finance Act, 1994 for delayed payment by a Public Sector Undertaking, split-up remittances made, applicability of interest on the full amount due, and calculation of interest without reference to actual delay.

Analysis:
1. The primary issue in this case is the levy of interest under Section 75 of the Finance Act, 1994 for delayed payment by a service provider, a Public Sector Undertaking. The appellant, liable for tax under the Act, had no dispute regarding the liability but contested the interest levied along with a penalty for delay in deposit. The Tribunal had deleted the penalty, focusing the appeal on the interest levy.

2. The key contention revolved around the calculation of interest, which was being imposed on a monthly basis without considering the actual days of delay. The appellant had made split-up remittances, with a portion paid before the due date and the rest after. However, the interest was calculated on the total amount due for the whole month in which the delay occurred, irrespective of the actual duration of the delay.

3. The questions of law were reframed to address specific concerns. These included whether the Tribunal correctly upheld the interest levy for the entire month without considering the actual delay period, whether interest could be charged on the full tax amount when a portion was paid on time, and whether the time taken by the Department of Telecommunications for payment could be deemed as a delay warranting interest under Section 75.

4. After hearing arguments from both parties, the Court analyzed the provisions of the Finance Act, 1994, focusing on the amendments made over the years regarding the interest rates and the period for which interest could be charged on delayed payments.

5. The Court emphasized that interest should only be levied for the actual period of delay, either in days or months, as per the statutory provisions. It was noted that the interest should not be imposed for the entire month when the delay was only for a few days, as observed in the present case.

6. Additionally, the Court examined a Circular issued by the Chandigarh Commissionerate, which attempted to clarify the charging of interest in cases of delayed payments. However, the Court found that the Circular's interpretation deviated from the statutory provisions, leading to an erroneous levy of interest.

7. The Court ruled in favor of the appellant, setting aside the orders of the Commissioner and the Tribunal. The directions issued included recalculating the interest only for the actual days of delay and on the delayed amounts, ensuring proper notice to the appellant for the revised computation. The Court also emphasized that if payments were made before the due date, no interest levy should apply.

8. In conclusion, the Court allowed the appeal, answering all questions of law in favor of the appellant and against the Revenue, with no costs imposed.