2020 (2) TMI 608 - AT - Service Tax

Demand of service tax alongwith interest - amount in dispute has already been paid by the respondent but the interest is not paid - recovery of interest. As per (ASHOK JINDAL) - MEMEBR (JUDICIAL) - HELD THAT - The amount in dispute has already been paid by the respondent. In these circumstances, we do not find any merit in the appeal, accordingly, the appeal is dismissed. As per (SANJIV SRIVASTAVA) - MEMBER (TECHNICAL) - HELD THAT - The respondents though have paid the paid the tax/ duty have not deposited the interest due on account of delay in payment of the tax/ duty. Hence when Commissioner (Appeal) has set aside the proceedings for demand of tax/ duty, it would impact the recovery of interest which has not been paid by the respondents. It is well settled law and Hon ble Apex Court has constantly held that demand of interest under a fiscal statue is absolute liability and arises on the account of late payment of tax from the due date. Since the liability is absolute no separate proceedings are required for recovery of interest. In case of admitted duty/ tax liability if there is delay in payment of duty/ tax, the revenue should proceed to recover the interest due on the said admitted tax/ duty along with the admitted duty/ tax. Thus, recovery of interest under section 11AB of the Central Excise Act, 1944/ Section 75 of the Finance Act, 1994 is not a consequence of confirmation of demand made in terms of Section 11A of Central Excise Act, 1944/ Section 75 of Finance Act, 1994 but is a consequence of delay in payment of duty/ tax. Hence just for the reason that Commissioner (Appeal) has held that demand of duty/ tax cannot be sustained for the reason that assessee has already paid the duty/ tax would not come in the way of recovery of interest that I due for the reason of delay in payment of tax. The interest that is due needs to be recovered as sums due to the government by application of provisions of Section 11 of Central Excise Act, 1944.

Summary

Issues Involved:
1. Validity of the Commissioner's decision to drop the demand after the respondent paid the service tax.
2. Liability for interest due to delayed payment of tax/duty.

Issue-wise Detailed Analysis:

1. Validity of the Commissioner's Decision to Drop the Demand:
The revenue appealed against the impugned order where the Commissioner (Appeal) dropped the demand against the appellant, as the respondent had already paid the service tax. The Authorized Representative for the appellant admitted that the disputed amount had been paid. Consequently, the appeal was dismissed due to lack of merit, as the tax in question was already settled by the respondent.

2. Liability for Interest Due to Delayed Payment of Tax/Duty:
The revenue's appeal was also based on the fact that although the respondents paid the tax, they had not deposited the interest due to the delay in payment. It was emphasized that the demand of interest under a fiscal statute is an absolute liability arising from the late payment of tax, and no separate proceedings are required for its recovery. The Hon’ble Apex Court has consistently held this view, as seen in cases like Prahalad Rai Vs Sales Tax Officer and Commissioner of Trade Tax vs Kanhai Ram Thakedar.

The Hon’ble Bombay High Court, in the case of Commissioner Of Central Excise vs Padmashri V.V. Patil Sahakari Shakar Karkhana, clarified that interest under Section 11AB of the Central Excise Act, 1944 (similar to Section 75 of the Finance Act, 1994) is mandatory and not discretionary. The court noted that the liability to pay interest is civil, not penal, and arises even if the duty evasion is not intentional. Payment of duty before the issuance of a show cause notice does not exempt the assessee from liability to pay interest.

The court also discussed that the interest is payable from the due date of the tax until its payment, irrespective of whether the duty was paid before the issuance of a show cause notice. The explanation under Section 11AB(2B) does not nullify the obligation to pay interest; instead, it clarifies that interest is due on any short-paid duty, even if the duty is paid before formal determination by the authorities.

Conclusion:
The Tribunal concluded that the appeal filed by the revenue was infructuous since the respondent had already paid the tax. However, the revenue is entitled to recover the interest due to the delay in payment. The interest liability is absolute and can be recovered as sums due to the government under Section 11 of the Central Excise Act, 1944, or any other applicable legal provision. The appeal was dismissed, but the revenue was advised to explore the possibility of recovering the interest through appropriate legal channels.