2006 (4) TMI 247 - HC - Service Tax

Interest- The appellant issued Notice to the respondent asking him show cause as to why interest should not be charged for not paying Service tax before the prescribed dates for payment. The respondent filed a reply stating that there is no delay in payment of Service tax as it has been credited to the Bank on day-to-day basis. Thereafter, the respondent was called upon to produce the challans submitted to the Bank for the period in question, which was produced by the respondent. Held that- mind not applied properly to contentions in impugned order whether tax paid on day to day basis or lump sum basis after stipulated period. Impugned order set aside. Matter remanded to original authority.

Issues:
- Liability to pay interest for delayed payment of Service Tax
- Compliance with Section 68 of the Service Tax Act
- Payment of Service tax within stipulated period
- Crediting tax to the central government account
- Consideration of day-to-day basis payment

Liability to pay interest for delayed payment of Service Tax:
The Commissioner of Service Tax filed an appeal against a tribunal's decision that the respondent was not liable to pay interest for delayed Service Tax payment. The respondent argued that the tax was credited daily to the bank account, while the appellant contended that the amounts must be credited by the 15th of the following month to avoid a delay of about 15 days. The High Court noted that failure to credit tax to the central government within the prescribed period incurs interest under Section 75 of the Act. The Court clarified that the payment need not be made to a specific head of account, and if credited to the government's account, the liability to pay tax cannot be imposed.

Compliance with Section 68 of the Service Tax Act:
The Court analyzed whether a payment made within the stipulated time to the central government account, albeit not to the specific Service Tax Account head, fulfills the requirements of Section 68. It was determined that as long as the tax is credited to the central government's account, the liability to pay tax cannot be enforced based on the specific head of account. The Court emphasized that adherence to the prescribed period for crediting tax to the government account is crucial to avoid interest on delayed payments.

Payment of Service tax within stipulated period:
The case revolved around the timeliness of Service Tax payments for the period between June to September 1998. The appellant contended that the respondent failed to pay the tax within the stipulated period, leading to a delay in payment. The respondent argued that payments were made daily to the central government account, albeit credited to the Service tax accounting head later. The High Court highlighted the importance of timely payments as per the Act's provisions to avoid interest charges for delayed payments.

Crediting tax to the central government account:
The Court examined whether the respondent's practice of crediting Service Tax payments daily to the central government account sufficed for compliance with the Act. While the respondent maintained that payments were made daily and later transferred to the Service tax accounting head, the authorities did not ascertain the payment frequency. The Court emphasized the necessity for authorities to determine the actual payment timeline to assess compliance accurately.

Consideration of day-to-day basis payment:
The High Court addressed the discrepancy regarding the frequency of Service Tax payments made by the respondent. While the respondent claimed daily payments to the central government account, the authorities did not verify this aspect. The Court emphasized the need for a thorough examination to establish whether payments were indeed made daily or delayed beyond the stipulated period. Consequently, the Court set aside previous orders and remanded the matter for reconsideration to determine the actual payment timeline and compliance with the Act's provisions.

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