2019 (3) TMI 1396 - AT - Service Tax

Demand of interest - Valuation of manpower recruitment or supply agency service - inclusion of administrative charges received in assessable value - Held that - Section 75 of the Finance Act, deals with the provision for payment of interest. It says that whoever fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay interest at the rates specified. In the present case, the appellants have discharged the differential service tax with delay. Therefore, they are bound to pay the interest demand also - The non-payment of interest along with service indicates an intention to escape from such liability and intention to evade such payment. Therefore, the show cause notice issue invoking extended period is justified. Appeal dismissed - decided against appellant.

Summary

Issues:
Demand of interest on belatedly paid service tax without penalty imposition.

Analysis:
The case involved a dispute regarding the demand of interest amounting to ?19,80,691/- on belatedly paid service tax without any penalty imposition. The appellants, a manpower recruitment agency, had not included administrative charges in the taxable value for discharging service tax on the service provided to M/s.Neyveli Lignite Corporation Ltd. The appellants paid the differential amount of ?1,31,81,871/- belatedly in instalments but did not pay the interest on this amount. The adjudicating authority confirmed the demand of interest but did not impose any penalty, leading to the appeal.

Appellant's Argument:
The appellant contended that administrative charges were not part of the taxable value as they were reimbursable expenses incurred for providing the service. They argued that the show cause notice invoking the extended period for demanding interest was not sustainable as the department should have issued the notice within the normal period upon discovering the belated payment of service tax.

Respondent's Argument:
The respondent supported the findings of the impugned order, stating that the appellants had to pay interest under section 75 of the Finance Act, 1994, for belatedly discharging the service tax. They argued that the administrative charges should be included in the taxable value, as no evidence was provided by the appellants to prove that these charges were reimbursed by the customer. The respondent considered the case as a clear instance of suppression of facts, justifying the show cause notice issued invoking the extended period.

Judgment:
After hearing both sides, the tribunal upheld the demand for interest, emphasizing that the appellants failed to provide evidence that the administrative charges were reimbursable expenses. The tribunal cited section 75 of the Finance Act, which mandates payment of interest for delayed tax credit to the government. The tribunal concluded that the appellants' failure to pay interest along with the service tax indicated an intention to evade payment, justifying the show cause notice issued invoking the extended period. Consequently, the appeal was dismissed, and the impugned order was upheld. Additionally, a miscellaneous application filed by the Revenue for a change of cause title was allowed.