2009 (1) TMI 206 - AT - Service Tax

Interest on delayed payment of Service Tax Interest - A plain reading of the Rule 6(1), as it existed prior to 31-3-05, in the context of the objective of the law, clearly shows that the reference to the due date is the date of receipt of the value of the taxable services and not the receipt of the Service tax from the service-recipients, as no obligation to pay tax is on such recipients - There are cases where the recipients pay a consolidated amount and not taxable value and tax separately - In such a case, as rightly pointed out by the learned Counsel himself, the consolidated amount would be deemed to be inclusive of tax and the tax amount payable has to be calculated treating such amount as the cum-tax value - Since the appellants had received the value for taxable services earlier, they had an obligation to pay the tax by the due dates and not having done so, they are required to pay the interest towards the delayed payment of tax.

Summary

Issues:
Challenge to interest amount on delayed payment of Service tax confirmed by lower Appellate Authority.

Analysis:
The appellants did not contest the Service Tax amount paid before the show cause notice issuance, with penalties waived. The appeal focused solely on the interest amount related to delayed Service tax payment. The advocate for the appellants argued that under Section 12A of the Central Excise Act, the gross amount specified in Section 67 of the Finance Act should include the Service tax component. He contended that since the tax was paid promptly after receiving it from clients, no interest should apply. Additionally, he claimed that paying the tax before the show cause notice should exempt them from interest charges.

The learned Advocate highlighted the unamended Rule 6(1) of the Service Tax Rules, asserting that the appellants paid the tax promptly upon receiving the taxable value, thus absolving them of interest liability. However, the learned SDR supported the lower Appellate Authority's decision.

Upon review, the Tribunal emphasized the obligation on taxpayers to pay tax in a timely manner as prescribed by law to maintain tax administration order. The Tribunal rejected the argument that paying tax before the show cause notice exempts from interest, as interest accrues from the due date till payment. The Tribunal clarified that the obligation to pay tax falls on service providers, not clients, and the due date refers to receiving taxable value, not Service tax from clients. Any delay in tax payment beyond the due date necessitates interest payment, as per the law's objective.

Conclusively, the Tribunal found the appeal lacking merit and dismissed the request for interest waiver. The appellants were held liable for interest on delayed Service tax payment, emphasizing adherence to tax payment timelines and obligations.