2008 (2) TMI 45 - AT - Service Tax

There is no justification in the stand taken by the appellants that short-payment of service tax was on account of an error in calculation and not by way of suppression and the short-paid tax was wilfully paid as soon as the error was detected Liability to pay interest u/s 75 are mandatory, not penal - It is a civil liability which is inescapable Interest is payable assessee s appeal dismissed

Summary

Issues:
Demand of interest on belated service tax payment under Section 75 of the Finance Act, 1994.

Analysis:
The appellants, a Public Sector Undertaking, appealed against a demand of interest amounting to Rs.1,43,950/- on belatedly paid service tax for the period from October, 2000 to May, 2002. The appeal was made under Section 75 of the Finance Act, 1994, which mandates interest payment for delayed service tax credit to the Central Government. The appellants argued that the short-payment was due to an error in calculation, not suppression, and the tax was promptly paid upon error detection. They contended the absence of mens rea to invoke penal provisions. However, the Tribunal found no merit in the appellants' stance. Despite the error being unintentional, the liability to pay interest under Section 75 was deemed mandatory, irrespective of intent. The Tribunal emphasized that the interest levy was a civil liability, not penal, and was unavoidable under the law. The appellants' claim of excess tax payment available for adjustment against the dues was deemed unsubstantiated as no legal provision for such adjustment was cited, and the plea was not raised before lower authorities.

Conclusion:
The Tribunal dismissed the appeal, upholding the demand for interest on the belated service tax payment. The decision was based on the mandatory nature of interest payment under Section 75, emphasizing the civil liability aspect and disregarding intent or error as valid considerations under the provision. The absence of legal provision for adjusting excess tax payment against interest dues further weakened the appellants' case.