Voluntary service tax payment avoided interest, but delayed return filing by a transport service recipient still attracted penalty.

Voluntary payment of service tax before any notice did not sustain interest, because the demand only sought appropriation of the amount already deposited and recovery of interest on delayed payment; the interest demand was deleted. Delayed filing of the prescribed return by a recipient of goods transport operator services attracted penalty, because the statutory filing obligation was not complied with; the penalty was upheld. The appeal therefore succeeded only on deletion of interest, while the penalty challenge failed.

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Issues: (i) Whether interest was payable on the service tax amount deposited by the assessee before issuance of notice, and (ii) whether penalty was sustainable for delayed filing of the return by a recipient of goods transport operator services.

Issue (i): Whether interest was payable on the service tax amount deposited by the assessee before issuance of notice.

Analysis: The notice did not demand fresh service tax but sought appropriation of the amount already deposited and recovery of interest on the delayed payment. The amount had been paid voluntarily on the assessee's own calculation, without any prior demand from the Revenue. On the facts, the liability to interest was treated as governed by the settled view that delayed discharge of service tax interest cannot be sustained where the issue is covered in favour of the assessee.

Conclusion: Interest was not payable, and the assessee succeeded on this issue.

Issue (ii): Whether penalty was sustainable for delayed filing of the return by a recipient of goods transport operator services.

Analysis: The assessee was required to file the return under the special return-filing provision applicable to recipients of goods transport operator services by the prescribed time, but the return was filed later than that date. The statutory obligation having not been complied with, the penalty imposed for such default was upheld.

Conclusion: Penalty was sustainable, and this issue was decided against the assessee.

Final Conclusion: The appeal succeeded only to the extent of deletion of interest, while the challenge to the penalty failed and the order was otherwise maintained.

Ratio Decidendi: Voluntary payment of service tax without prior demand may not attract interest on the facts of the case, but statutory default in filing the prescribed return can justify penalty.

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