2017 (2) TMI 104 - AT - Service Tax

Interest on delayed payment of tax - the tax liability on GTA service was belatedly paid by the appellant on 5.9.2009. It is also not disputed that they had indicated the fact of the same vide two letters issued on 1.9.2009 and 7.9.2009 - Held that - although interest liability should have also been discharged by the appellant at that point of time, nonetheless, that is not done. However, neither has the department taken note of the discrepancy immediately and proximate to the payment of such belated tax liability. There is no whisper in the SCN concerning any ingredient present for invocation of extended period - demand for interest is certainly hit by limitation and will not sustain. Reliance was placed in the case of Hindustan Insecticides Ld. Vs CCE, LTU 2013 (8) TMI 225 - DELHI HIGH COURT , where it was held that limitation applicable to claim for principal amount applies to interest claim also. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability for belated payment of service tax on GTA for the period 2007-08 and 2008-09.
2. Demand of interest liability amounting to ?2,86,023.
3. Application of limitation to interest claim.
4. Discrepancy in the department's response to belated tax payment.
5. Justification of interest liability.

Analysis:

1. The case involved the belated payment of service tax on GTA services for the period 2007-08 and 2008-09 by the appellant, which was paid on 5.9.2009, without discharging the interest liability. The lower authority confirmed a demand of interest amounting to ?2,86,023, which was upheld by the Commissioner (Appeals), leading to the appeal.

2. During the hearing, the appellant's advocate highlighted that the belated tax payment was due to confusion regarding liability and the controversy over reverse charge mechanisms. The advocate argued that the department did not raise the issue of interest liability promptly despite the appellant's communication about the payment. Citing various case laws, the advocate contended that the demand for interest was time-barred and unjustified.

3. The appellant's counsel emphasized that the limitation applicable to the principal amount should also extend to interest claims, especially when there was no allegation of fraud, willful misdeclaration, or suppression of facts in the show cause notice issued by the department on 31.1.2014.

4. On the contrary, the department representative maintained the correctness of the impugned order and pointed out that the appellant's payment in September 2009 followed a communication from the department in June 2009. The department argued that limitation should not apply to interest liability.

5. After considering both sides and reviewing the facts, the tribunal noted that the appellant had informed the department about the belated tax payment through letters in September 2009. However, the department did not address the interest liability discrepancy promptly. In the absence of any mention in the show cause notice about factors warranting an extended period, the tribunal concluded that the demand for interest was time-barred based on the legal precedents cited. Consequently, the appeal was allowed, ruling in favor of the appellant.