2003 (6) TMI 5 - AT - Service Tax

Appellate Tribunal rules in favor of appellants on service tax payment timing

The Appellate Tribunal CESTAT, Mumbai allowed the appeal filed by the appellants regarding late payment of service tax. The Tribunal held that if the ... Deemed payment where cheque presented to authorised bank subject to realization - waiver of interest and penalty where cheque presented before due date and not dishonoured - realization of cheque - application of executive instruction based on Sahara Airlines decisionDeemed payment where cheque presented to authorised bank subject to realization - realization of cheque - waiver of interest and penalty where cheque presented before due date and not dishonoured - Effect of presentation and subsequent realization of cheque for payment of service tax on liability to interest and penalty - HELD THAT: - The Tribunal applied the executive instruction recognising the ratio of the Sahara Airlines decision, holding that where government dues are deposited by cheque into an authorised bank before the due date and the cheque is not subsequently dishonoured, payment is to be treated as made on the date the cheque was handed to the Government's bankers. The Tribunal also relied on the amended Rule 2A of the Service Tax Rules which provides that presentation of the cheque to the designated bank shall be deemed to be the date of payment, subject to realization of the cheque. In the present case the cheques were presented before the due date and were realized a day or two later; the Revenue conceded that on these grounds the appellants had merit. The Tribunal therefore held that interest/penalty ought not to be recovered where the cheque was presented before the due date and not dishonoured, while preserving the department's right to take penal action if the cheque is dishonoured or clearance is abnormally delayed due to the assessee's lapse. [Paras 2, 3]Appeal allowed; demand of interest/penalty set aside insofar as cheques were presented before the due date and subsequently realized.Final Conclusion: The appeal was allowed because cheques for service tax were presented to the authorised bank before the due date and were not dishonoured; under the executive instruction and Rule 2A such presentation (subject to realization) is deemed payment, and interest/penalty could not be recovered in these circumstances. The Appellate Tribunal CESTAT, Mumbai allowed the appeal filed by the appellants regarding the late payment of service tax. The Tribunal referred to a government decision regarding cheque payments and clarified that if the cheque is not dishonored and the payment is made before the due date, no penalty or interest should be imposed. The Revenue representative agreed that the appellants had merit in their case, and the appeal was allowed.