Interest on delayed service tax is mandatory, but penalty fails where delay is due to accounting practice and no mala fide is shown.

Interest on delayed payment of service tax is payable under Section 75 of the Finance Act, 1994 and cannot be waived, so the interest demand was upheld. Penalty was not sustainable because the delay arose from the assessee's accounting practice and no mala fide was found, so the penalty was set aside.

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Issues: Whether interest was payable on delayed deposit of service tax and whether penalty could be sustained in the absence of mala fide.

Analysis: Interest on delayed payment of service tax is payable under Section 75 of the Finance Act, 1994 and cannot be waived. However, where the delay is attributable to the assessee's accounting practice and no mala fide is found, penalty is not justified.

Conclusion: Interest was upheld, but the penalty was set aside. The appeal succeeded only to the extent of deletion of penalty.

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