2015 (1) TMI 41 - AT - Service Tax

Levy of interest on service tax demand when the assessee has sufficient balance in CENVAT Credit - payment of service tax made quarterly through their CENVAT credit account was delayed for which the assessee was asked to pay interest on service tax u/s 75 of the Finance Act, 1994. - Held that - It is observed from the case records that appellant had sufficient balance to debit that portion of duty demand which was due in the relevant month. No contrary evidence has been brought on record by the Revenue that appellant was not having sufficient balance in its CENVAT account to debit that differential duty in the CENVAT account. Even in a clandestinely evasion cases also the CENVAT credit of inputs/ input services admissible, during the period of offence, is allowed to be abated from the total duty demanded even at the appeal stage. The interest payable is only calculated on the duty liability finally determined and not with respect to the duty demanded in the show cause notice. In this case appellant stands on a better footing as the CENVAT credit was available in the CENVAT account but could not be debited. It has to be thus held that interest is not payable with respect to duty required to be debited in the CENVAT Credit Account provided sufficient balance was available in the CENVAT Credit Account. Nothing has been brought on record that such a credit was not available in the CENVAT Account during the relevant period for debit. - Decided in favour of assessee.

Summary

Issues:
1. Liability of the appellant to pay interest on delayed payment of service tax through CENVAT credit account.
2. Applicability of time limit for demanding interest under Section 75 of the Finance Act, 1994.

Issue 1: Liability of the Appellant to Pay Interest on Delayed Payment of Service Tax Through CENVAT Credit Account:

The appellant filed an appeal against an order dated 31.12.2013, where it was found that although the appellant was making cash payments of service tax on a monthly basis, the part of service tax required to be paid by debiting the CENVAT credit account was paid quarterly. The appellant was asked to pay interest on the delayed payment of service tax through the CENVAT credit account. The appellant argued that they had sufficient credit in the CENVAT account and believed the duty part was to be debited quarterly. The Revenue contended that if duty payable was not debited in the CENVAT account monthly, it constituted delayed payment attracting interest liability. The Tribunal observed that the appellant had sufficient balance to debit the duty in the relevant month and that interest was not payable if there was enough credit in the CENVAT account. The appellant's appeal was allowed on merit as they stood on a better footing due to the availability of CENVAT credit.

Issue 2: Applicability of Time Limit for Demanding Interest under Section 75 of the Finance Act, 1994:

The Adjudicating authority held that there was no time limit for demanding interest under Section 75. However, the appellant argued that the demand was time-barred, citing judicial pronouncements. The Tribunal noted that demands for ST-3 returns filed after a certain date would not be time-barred. Despite this, the Tribunal found the issue in favor of the appellant on merit, rendering the time bar aspect of academic nature in the proceedings. The appellant's appeal was allowed based on the observations and settled legal principles.

In conclusion, the Appellate Tribunal CESTAT Ahmedabad ruled in favor of the appellant, holding that interest was not payable if there was sufficient balance in the CENVAT credit account and that the demand for interest was not time-barred in the present case. The judgment was pronounced on 19.12.2014.