2021 (11) TMI 364 - AT - Service Tax

Interest on delayed payment of service tax through Cenvat Credit account - Period of limitation - suppression of facts - Rule 6 of Service Tax Rules, 1994 - HELD THAT - The interest is proposed to be levied on the appellant for the period from October 2006 to September 2010 and the show cause was issued on 19.03.2012, during which period the respondent-department was only empowered to demand tax due for a period of one year unless, there is allegation of fraud, mis-representation, collusion, misstatement, suppression of fact or contravention to provisions of the Finance Act is made with proposal for penalty under Section 78 of the Finance Act, 1994. No such penalty was proposed in the show cause notice nor even there is any allegation of wilful withholding of payment of service tax on any of the above referred grounds was made. This being the facts on record there is no requirement to give a finding that under Section 75 of the Finance Act, interest is a natural corollary and consequence for any default of payment of service tax within the stipulated time. On the contrary, it can very well be said that the tax liability or its interest component can never be enforced and recovered from the assessee beyond the period from one year without any allegation of wilful non-payment on the ground of fraud, mis-statement, collusion etc. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of interest on delayed payment of service tax through Cenvat Credit account.

Analysis:
The case involved the confirmation of interest on delayed payment of service tax through the Cenvat Credit account by the Commissioner (Appeals). The appellant was found to have failed to discharge tax liability on time, leading to a demand for interest on delayed payments made between October 2006 to September 2010. The appellant's appeal before the Commissioner (Appeals) did not yield a favorable outcome, prompting the appeal before the Appellate Tribunal CESTAT Mumbai.

During the appeal, the appellant's representative cited various case laws to support the argument that no interest is payable for delayed payment when the assessee has sufficient credit in its Cenvat account. On the other hand, the Authorized Representative for the respondent-department referred to judicial decisions highlighting that interest is payable in the event of delayed payment of service tax, regardless of whether it is payable from the Cenvat Credit account or in cash, based on Section 75 of the Finance Act, 1994.

After reviewing the case record, submissions, relevant law provisions, and case laws, the Tribunal noted that the show cause notice issued to the appellant proposed interest for the period from October 2006 to September 2010. However, during that period, the department was only empowered to demand tax due for one year unless specific grounds like fraud, misrepresentation, collusion, or contravention to the Finance Act were alleged with a proposal for penalty under Section 78. Since no such penalty was proposed, and there was no allegation of willful non-payment, the Tribunal concluded that interest could not be enforced beyond one year without such allegations.

As a result, the Tribunal allowed the appeal, setting aside the order passed by the Commissioner (Appeals) confirming the demand for payment of interest. The judgment emphasized the importance of specific grounds for alleging non-payment beyond one year and highlighted that interest cannot be enforced without such allegations under Section 75 of the Finance Act, 1994.

This comprehensive analysis highlights the key arguments, legal interpretations, and the final decision of the Appellate Tribunal CESTAT Mumbai regarding the confirmation of interest on delayed service tax payments through the Cenvat Credit account.