2014 (10) TMI 475 - AT - Service Tax

Demand of interest - Delay in payment of tax - Held that - question of payment of tax is a simple fact. Tax can be paid either in cash or by debit in the CENVAT credit account or by way of both. If the tax is paid through the CENVAT credit, it is the date of debit in the CENVAT account which is the date of payment of tax. Merely, because the credit is available in the books of accounts, it does not mean that the tax has been paid. Therefore, the liability to pay interest has to be computed from the due date of payment of tax to the actual date of payment. If viewed from this perspective, in the present case, inasmuch as the tax has been paid only on 15/02/2007 by debit in the CENVAT account, whereas the due dates for payment of tax were 05/09/2006 (sic) and 05/02/2007, there are delays of 102 days and 10 days in payment of tax and for these delays, the respondent is certainly liable to pay interest. Therefore, the impugned order is set aside to the extent of dropping of interest liability and we hold that the respondent is liable to pay interest for the above period of 102 days and 10 days respectively as proposed in the show cause notice - Decided in favour of Revenue.

Summary

Issues: Calculation of interest liability on delayed payment of service tax.

Analysis:
The appeal was filed by Revenue against an Order-in-Original passed by the Commissioner of Service Tax, Mumbai. The respondent, a corporation, was required to discharge service tax liability for certain months. The tax liabilities were not paid on time, resulting in delays of 102 days and 10 days for different periods. The Commissioner, under a wrong impression, confirmed a lower interest amount. However, the Revenue contended that the actual interest liability was significantly higher. The Additional Commissioner argued that interest must be calculated from the due date to the actual payment date. The respondent claimed they had enough CENVAT credit available, but the tax was paid late. The Tribunal held that the date of payment of tax is crucial, whether in cash or through CENVAT credit. Merely having credit available does not mean the tax is paid. As the tax was paid late, the respondent was liable to pay interest for the delays. Consequently, the impugned order was set aside, and the respondent was held liable to pay interest for the respective delay periods. The appeal filed by Revenue was allowed, emphasizing the importance of timely tax payments and the computation of interest based on the actual payment dates.

This judgment clarifies the legal principles regarding the calculation of interest liability on delayed payment of service tax. It highlights the significance of the actual date of tax payment, whether through cash or CENVAT credit. The decision emphasizes that having credit available does not absolve the taxpayer from interest liability if the tax is paid late. The Tribunal's ruling underscores the importance of timely tax compliance and the consequences of delayed payments, reaffirming the obligation to pay interest for such delays.