Cheque presentation date governs service tax payment timing where the cheque is honoured later, defeating interest or penalty

Service tax paid by cheque is treated as paid on the date the cheque is presented to the authorised bank, where the amended Rule 2A applies and the cheque is subsequently realised. If the cheque is presented before the due date and is not dishonoured, a short delay in realisation does not justify interest or penalty. On those facts, the payment is treated as timely and recovery of interest or penalty is not sustainable.

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Issues: Whether service tax deposited by cheque before the due date is treated as paid on the date of presentation of the cheque to the authorised bank when the cheque is realised later.

Analysis: The amended Rule 2A of the Service Tax Rules provided that, where service tax is deposited by cheque in the designated bank, the date of presentation of the cheque is deemed to be the date of payment, subject to realization of the cheque. The cheque in question was presented before the due date and was not dishonoured; the delayed realization was only by a day or two. On that basis, interest or penalty proceedings were not warranted.

Conclusion: The issue is answered in favour of the assessee. The payment is treated as made on the date of presentation of the cheque, and recovery of interest or penalty is not sustainable.

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