2015 (1) TMI 458 - AT - Service Tax

Appeal decision: Interest payable for delayed tax, penalties waived based on case circumstances.

The appeal was disposed of with the decision that interest is payable due to the delayed tax payment, but penalties were set aside considering the ... Interest on delayed payment of service tax - penalty under Sections 77 & 78 of the Finance Act, 1994 - reverse charge mechanism - revenue neutralityInterest on delayed payment of service tax - revenue neutrality - Section 75 of the Finance Act, 1994 - reverse charge mechanism - Whether interest is payable on service tax paid late for services received under reverse charge, despite revenue neutrality. - HELD THAT: - The Tribunal held that payment of tax must be made within the time prescribed and that revenue neutrality does not absolve the obligation to pay tax on time. The relevant period for calculating interest is the interval between the due date and the actual payment date; the Government is deemed to have lost interest for that period even though the assessee could claim Cenvat credit once duty was paid. Reliance on decisions addressing different factual matrices was distinguished. The Tribunal concluded that interest is therefore payable under Section 75 for the delay in payment for the months in question. [Paras 6]Interest under Section 75 is payable for the delayed payment.Penalty under Sections 77 & 78 of the Finance Act, 1994 - revenue neutrality - intention to evade - Whether penalties under Sections 77 and 78 should be imposed where service tax was not paid for two months due to oversight but tax was later paid and Cenvat credit claimed. - HELD THAT: - The Tribunal found that the appellants regularly paid service tax and that the failure to pay for the two months arose from oversight. There was no establishment of intention to evade payment of duty. In these circumstances, and having regard to precedents relied upon by the appellant, the Tribunal exercised its discretion to relieve the appellants from penalties, setting them aside. [Paras 7]Penalties under Sections 77 and 78 are set aside for lack of intention to evade.Final Conclusion: The appeal is disposed of by upholding the demand of interest for delayed payment of service tax for March 2008 and March 2009, while setting aside the penalties under Sections 77 and 78 of the Finance Act, 1994. Issues:Appeal against demand of service tax, interest, and penalties under Sections 77 & 78 of the Finance Act, 1994.Analysis:1. Service Tax Demand: The appellants had not paid the required service tax for March 2008 and March 2009, which was paid later on 1st October 2009. The Ld. Counsel agreed to pay the service tax demand as it would be revenue neutral, but disputed the demand of interest and penalties. The Tribunal judgment in the case of Reliance Industries Ltd. was cited to support the argument against interest payment in a revenue-neutral situation. However, the judge noted that simply achieving revenue neutrality does not exempt the appellants from paying tax on time as required by law. The judge held that interest is payable under Sections 75 of the Finance Act due to the delay in payment.2. Interest Payment: The Ld. A.R. emphasized that payment of interest is a civil liability and referred to the judgment of the Hon'ble Mumbai High Court in the case of M/s. Vikhe Patil SSK. Ltd. The onus was on the appellant to prove no intention to evade duty payment. The judge considered the time between the due date and the actual payment date for interest calculation, stating that the government had indeed lost interest during this period. The judge concluded that interest is payable as per the Finance Act.3. Penalties: The Ld. Counsel argued that penalties should not be imposed, citing a similar case involving a group company where penalties were set aside. The appellants, despite missing two transactions due to oversight, were regularly paying service tax. The judge noted that the intention to evade payment of duty was not established, especially considering the appellants' eligibility to take Cenvat Credit once the duty is paid. Relying on the case of Patel Alloys Pvt. Ltd., the judge set aside the penalties while affirming the payment of interest.4. Judgment: The appeal was disposed of with the decision that interest is payable due to the delayed tax payment, but penalties were set aside considering the circumstances of the case. The judge's decision was based on the legal provisions and precedents cited during the proceedings.