2013 (7) TMI 627 - AT - Service Tax

Chareability of interest and imposition of penalty whether interest is chargeable from date of taking advances to the date of payment of service tax at the time of issue of invoices u/s 68 C/G can prescribe the manner in which service tax is to be paid - Held that - interest is chargeable on the advances from 5th of month following the quarter to date of payment Under First proviso to Rule 6 of the Service Tax Rules if assessee is an individual or proprietary firm or partnership firm service tax is to be paid by 5th of the month immediately following the quarter and under Rule 6 of the service tax Rules it was not done by the assessee. time for paying service tax - whether service tax required to be paid at the time of raising final invoice or on date of taking of advance from the service recipient - Held that - Service tax is to be paid on the payment received in the quarter by 5th of month immediately following the quarter - there was no doubt that tax was payable on the advances received in quarter by 5th of the month following the quarter. Limitation of time barred - whether the demand was time-barred - Show Cause Notice had been issued u/s 75 - there was no time limit prescribed for demand of the interest in the section - Held that - There was no reason for invoking extended period after appellant filed revised return show Cause Notice is hit by time limitation - demand is not sustainable on the limitation - court followed the judgement of CCE Vs. TVS Whirlpool Ltd. (1999 (10) TMI 701 - SUPREME COURT OF INDIA) - there was no case for imposition of penalty appeal decided in favour of assessee

Summary

Issues:
1. Whether interest is chargeable on advances received by the appellant?
2. Whether the demand is time-barred?
3. Whether any penalty is imposable on the appellant?

Analysis:
1. The issue in this appeal revolves around the chargeability of interest on advances received by the appellant for services to be provided. The department contended that service tax should have been paid on the advances received, but the appellant paid it only when issuing final invoices. The tribunal analyzed the relevant provisions under Section 67 of the Act, which specify that service tax is payable on the gross amount charged by the service provider, including advances. It was established that service tax is indeed payable on advances received, and the tax should have been paid by the 5th of the month following the quarter in which the advances were received. As the appellant failed to do so, interest was deemed chargeable from the due date until the actual payment date.

2. Regarding the question of whether the demand is time-barred, the tribunal considered the issuance of the Show Cause Notice on 27.7.2009, demanding interest for the period from January 2007 to March 2008. The appellant argued that the notice was time-barred and cited a Tribunal decision in support. The tribunal referred to the absence of a specific time limit for demanding interest under Section 75 of the Act. Citing a Supreme Court decision, it emphasized that the period of limitation applicable to the principal amount should also apply to the claim for interest. The tribunal further examined the timeline of events, including the filing of revised returns and the issuance of the Show Cause Notice, ultimately concluding that the notice was indeed time-barred, and hence, the demand was not sustainable, leading to the dismissal of any penalty imposition.

3. The tribunal's analysis of the time limitation issue led to the conclusion that the Show Cause Notice was hit by time limitation and, therefore, the demand was unsustainable. Consequently, there was no basis for imposing any penalty on the appellant. The appeal was allowed in favor of the appellant, highlighting the importance of adhering to the prescribed timelines for tax payments and the implications of time-barred demands in such cases.