2021 (5) TMI 164 - HC - Service Tax

Rate of interest on delayed payment of service tax - at what rate petitioner is liable to pay interest i.e. 15% or 24%? - HELD THAT - Admittedly, the petitioner firm started its service after completing registration formalities in July, 2011 and the respondents have calculated the interest liability from the first quarter of Financial Year 2011-12. If the petitioner firm has started its services in July 2011, there cannot be any demand for the first quarter of 2011-12. As per the contention of respondents, petitioner made delayed payment of service tax between August, 2016 and February, 2017, i.e. the time when aforesaid notification was in force i.e. 14.05.2016. The notification fixed the rate of simple interest @ 24% in case where any amount is specifically collected as service tax and still not deposited with the Central Government on or before the date on which such payment became due whereas rate of 15% is fixed for any other situation - In the case in hand, it is the specific stand of petitioner that it did not specifically collect the tax from the service recipients. The respondents have quantified interest 24% per annum on the basis of Notification dated 01.03.2016 presuming that the petitioner has specifically collected some amount as service tax and still not deposited with Central Government, whereas the petitioner, in the invoices issued during the period in question did not collect any amount specifically mentioning it as service tax. The grant of benefit of cum-tax value in M/S BALAJI MANPOWER SERVICES, FARIDABAD VERSUS UNION OF INDIA AND ORS 2019 (10) TMI 540 - PUNJAB AND HARYANA HIGH COURT , further supports the case of the petitioner. The action of the respondents to charge interest @ 24% in accordance with Notification dated 01.03.2016 is arbitrary and not sustainable in the eyes of law - the impugned order modified to the extent of charging interest @ 15% - petition allowed in part.

Summary

Issues:
1. Calculation of interest liability based on Notification No.13/2016-ST dated 01.03.2016.
2. Discrepancies in interest calculation by respondent.
3. Rate of interest to be charged - 15% or 24%.

Analysis:
1. The petitioner filed a writ petition under Article 226/227 seeking to quash or modify an order passed by the Settlement Commission regarding the demand of interest in accordance with Notification No.13/2016-ST dated 01.03.2016. The respondents alleged that the petitioner did not disclose the correct value of services rendered, resulting in a shortfall in service tax payment. The Settlement Commission initially held that cum-tax benefit could not be allowed based on sample invoices, leading to a demand of ?72,65,808. After a modification by the High Court, the recalculated service tax liability was ?55,70,843, which the petitioner had already deposited. However, the interest liability was recalculated by the respondents to ?48,33,258 at a rate of 24%, disputed by the petitioner. The final order by respondents settled the service tax liability at ?55,70,843, maintaining the interest rate at 24%.

2. The petitioner contended that the interest should be charged at 15% instead of 24% as they did not specifically collect tax from service recipients. The respondents calculated interest by dividing the total tax liability equally between four quarters, which the petitioner argued was not justified. The petitioner highlighted that they did not mention service tax on invoices issued during the period in question. The respondents justified the 24% interest rate based on the notification in force during the payment period.

3. The High Court analyzed the Notification No.13/2016-ST dated 01.03.2016, which specified a 24% interest rate for specific collection of service tax and a 15% rate for other situations. As the petitioner did not collect tax from service recipients as per their claim, the court found the respondents' decision to charge 24% interest arbitrary. The court modified the order, ruling that the interest should be charged at 15% instead of 24% based on the facts presented and the lack of specific tax collection by the petitioner.

This detailed analysis covers the issues raised in the legal judgment comprehensively, addressing the calculation of interest liability, discrepancies in interest calculation, and the appropriate rate of interest to be charged.