2020 (10) TMI 199 - AT - Service Tax

Delayed payment of service tax - case of Revenue is that the Appellant herein was debiting its Books of Account every six months, the Appellant had deliberately delayed the payment of service tax and therefore, was liable to pay interest on such delayed payment under Section 75 of the Finance Act, 1994 - HELD THAT - The Appellant discharges its service tax liability by debiting its Cenvat credit account. The Appellant debits its Cenvat register every month, however, in its Books of Accounts, the Appellant passes the relevant journal entry only every six months. Further, I find that the Appellant maintained sufficient credit balance in their Cenvat credit account at all times. Therefore, the Appellant had no intention to evade the payment of service tax. Since, the Appellant duly debited its Cenvat register as per Rule 6 of the Service Tax Rules, 1994, the corresponding entry being made by the Appellant in its Books of Accounts cumulatively for six months, can at best qualify as a procedural irregularity and can in no way constitute a statutory violation, as alleged by the Department - the Appellant had filed the statutory returns within the stipulated time period and the monthly liability had been properly disclosed in such returns. The manner in which the Appellant was recording the journal entry in its Books of Accounts alone, in the absence of any statutory violation, is not sufficient to conclude that there was a delay in payment of Service Tax on the part of the Appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Delayed payment of service tax leading to interest and penalty charges.

Analysis:
The Appellant, engaged in providing taxable services, avails Cenvat credit for service tax paid on inputs and input services. The Department alleged that the Appellant delayed service tax payments by debiting its Books of Accounts bi-annually, contravening Rule 6 of the Service Tax Rules, 1994. A Show Cause Notice was issued, demanding interest and penalty. The Adjudicating Authority and Commissioner (Appeals) upheld the demand. The Tribunal heard both sides and examined the records.

The Tribunal observed that the Appellant discharged its service tax liability by debiting its Cenvat credit account monthly but recorded journal entries in its Books of Accounts bi-annually. Despite this, the Appellant maintained sufficient credit balance in its Cenvat account. The Tribunal noted that the Appellant's practice did not indicate an intention to evade tax payment. It emphasized that the Appellant's bi-annual entries, while a procedural irregularity, did not amount to a statutory violation. The Appellant consistently filed statutory returns on time, disclosing monthly liabilities accurately. Therefore, the Tribunal concluded that the Appellant's method of recording entries did not signify a delay in tax payment.

Ultimately, the Tribunal allowed the Appellant's appeal, ruling in favor of the Appellant. The judgment was pronounced on 6th August 2020 by Hon'ble Shri P. K. Choudhary, Member (Judicial) of the Appellate Tribunal CESTAT MUMBAI.