2019 (10) TMI 692 - AT - Service Tax

Demand of Interest - Section 11AA of Central Excise Act - HELD THAT - On identical issue, this Tribunal in the case of VIJAYA BANK VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH 2019 (3) TMI 975 - CESTAT BANGALORE has set aside the demand of interest - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of interest under Section 11AA of Central Excise Act.

Analysis:
The appeal was filed against an order confirming the demand of interest under Section 11AA of the Central Excise Act. The appellant, a bank engaged in providing taxable services, acted as an agent of the Reserve Bank of India for government transactions. A show cause notice was issued proposing a Service Tax demand along with interest and penalty. The Joint Commissioner confirmed the demand, and the Original Authority imposed interest and penalty. The Commissioner confirmed the interest demand but dropped the penalty. The appellant contended that the demand of interest was unsustainable, citing judicial precedents and compliance with RBI's directions to pay Service Tax. The Tribunal noted a similar case where interest demand was set aside, emphasizing that the appellant, as an agent of RBI, was not liable for Service Tax on government business. Compliance with RBI's direction to pay Service Tax before reimbursement and payment under Section 73A were highlighted. The Tribunal ruled that demanding interest was not tenable as the appellant was not liable for Service Tax, setting aside the interest demand.

The Tribunal referred to a Larger Bench decision regarding the appellant's non-liability for Service Tax on government business as an agent of RBI. Compliance with RBI's direction to pay Service Tax before reimbursement was noted, along with payment under Section 73A. The Tribunal emphasized that demanding interest when the main amount was not legally due was unjustifiable. Citing a previous case, the Tribunal set aside the interest demand, aligning with the decision in favor of the appellant. The Tribunal concluded that the demand of interest under Section 11AA of the Central Excise Act was unsustainable in law and allowed the appeal, setting aside the interest demand. The decision was based on the precedent and the appellant's non-liability for Service Tax on government transactions as an agent of RBI.