2019 (6) TMI 126 - AT - Service Tax

Recovery of interest - Extended period of limitation - whether for recovery of interest under Section 75 of the Finance Act, 1994, show cause notice could be issued invoking extended period of limitation? - HELD THAT - The show cause notice is bad, both for invocation of extended period of limitation and also for non-invocation or non-mentioning of proper Section 73(1) with proviso - show cause notice is held to be non-maintainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Recovery of interest under Section 75 of the Finance Act, 1994 invoking extended period of limitation.

Analysis:
The appellant, a Private Limited Company providing services under "Construction of Residential Complex," deposited tax quarterly for the period October 2011 to March 2013. Upon scrutiny, it was found that they were required to pay tax monthly, leading to a shortfall and interest demand of ?1,46,589. A show cause notice was issued in January 2015 invoking extended limitation period under Section 75 for delay in tax deposit, also proposing a penalty under Section 77. The notice was contested, resulting in confirmation of interest demand and imposition of a penalty of ?10,000.

Grounds of Appeal:
The appellant contended that the show cause notice was defective as it did not invoke Section 73(1), and cited a ruling reversing the Tribunal's decision on interest recovery time limits. They argued that the Commissioner erred in relying on the Tribunal's ruling and dismissing the absence of Section 73(1) as a clerical error, contrary to Supreme Court precedents emphasizing specificity in show cause notices.

Legal Arguments:
The appellant argued that the Commissioner erred in relying on a reversed Tribunal ruling and disregarding the absence of Section 73(1) in the notice. They cited Supreme Court cases emphasizing the importance of specific allegations in show cause notices for a fair opportunity to respond. Additionally, they referenced a Delhi High Court ruling linking the limitation period for interest claims to that of principal amounts, asserting that the demand for interest after 3 years of duty payment is time-barred.

Contentions and Rulings:
The Authorized Representative defended the impugned order, distinguishing the appellant's case from cited precedents and highlighting cases supporting automatic interest under Section 75 due to quarterly tax payments. However, the Tribunal found the show cause notice defective for invoking extended limitation and lacking specific mention of Section 73(1) with proviso. Consequently, the notice was deemed non-maintainable, the impugned order was set aside, and the appeal was allowed.

This detailed analysis covers the issues, grounds of appeal, legal arguments, and final contentions leading to the Tribunal's ruling in the judgment.