2019 (5) TMI 665 - AT - Service Tax

Demand of interest - period of limitation - service tax dues were paid by appellant but interest for such delay payment not made - HELD THAT - There is no time limit in Finance Act 1994 for issuing demand of interest. However, Hon ble High Court of Delhi has held in the case of HINDUSTAN INSECTICIEDES LTD. VERSUS COMMISSIONER CENTRAL EXCISE, LTU 2013 (8) TMI 225 - DELHI HIGH COURT that the demand for interest must be raised within the same time limit as taken of tax itself. In other words, the demand can be raised within 18 months (as applicable during the relevant period) if there are no elements of fraud, collusion, wilful mis-statement and within 5 years if these elements are present. - In the impugned order the adjudicating authority held that these elements were not present and as well as dropped the proposal to impose penalty under Section 78. Therefore, only the normal period of limitation of 18 months applies. The 18 month period must be reckoned with respect to the relevant date indicated in Section 73(6) In the present case, since the assessee has filed periodical returns the date on which the return is so filed becomes the relevant date. The first set of returns were filed in the instant case on 19.09.2013 and therefore 18 months from this date will be 18.03.2015. The show cause notice was issued on 16.03.2015 within the normal period of limitation - demand of interest upheld. Penalties u/s 76 and 77 of FA - HELD THAT - The main ground on which it has been pleaded is that they had difficulties in getting payments for their services from their clients. This is not substantiated by any documents apart from the assertion by the appellant before me and before the adjudicating authority. The conduct of the appellant also does not inspire much confidence because if there were difficulties and do they had paid the service tax late, they should have also paid the interest along with it instead of waiting till a show cause notice is issued by the department and then contesting it - Penalties upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Liability of service tax payment and interest under Section 75.
2. Imposition of penalties under Section 76 and Section 77.
3. Application of Section 80 of the Finance Act, 1994 for waiver of penalties.
4. Time limitation for demanding interest under the Finance Act, 1994.

Issue 1: Liability of service tax payment and interest under Section 75
The appellant, a service provider, had not discharged the service tax liability during the relevant period but paid it belatedly due to financial difficulties. The Commissioner ordered the recovery of interest under Section 75 and imposed penalties under Section 76 and Section 77. The appellant argued that the demand for interest should be time-barred as no elements of fraud or misstatement were present. The Tribunal held that the demand for interest must be raised within the same time limit as the tax itself, which is 18 months in this case. As the show cause notice was issued within this period, the demand for interest was upheld.

Issue 2: Imposition of penalties under Section 76 and Section 77
The appellant contested the penalties under Section 76 and Section 77, seeking waiver under Section 80 of the Finance Act, 1994, citing financial hardships and accounting problems. The Tribunal noted that the appellant failed to substantiate these claims with sufficient evidence. It was observed that the appellant's conduct did not support the plea for waiver, as they had paid the service tax late without including interest. Consequently, the Tribunal found no grounds to invoke Section 80 and waive the penalties.

Issue 3: Application of Section 80 of the Finance Act, 1994 for waiver of penalties
The appellant invoked Section 80 for the waiver of penalties due to financial difficulties and delays in receiving payments. However, the Tribunal found the lack of documentary evidence to support these claims. The appellant's behavior of paying service tax late without including interest did not align with the plea for waiver under Section 80. Therefore, the Tribunal rejected the plea for waiver of penalties.

Issue 4: Time limitation for demanding interest under the Finance Act, 1994
The Tribunal clarified that the demand for interest must be raised within the same time limit as the tax itself, which is 18 months in this case. As the show cause notice was issued within this period based on the date of filing returns by the appellant, the demand for interest was deemed valid. The Tribunal upheld the impugned order, concluding that there was no basis for intervention, and rejected the appeal.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT HYDERABAD, providing a detailed insight into the legal reasoning and conclusions reached.