2019 (3) TMI 1226 - HC - Service Tax

Interpretation of Central Excise Act on Service Tax Liability: Interest Payment & Limitation

The Court interpreted Section 35G(1) of the Central Excise Act in a case concerning liability for service tax on advertising agency services until ... Demand of Interest - taxability - advertising agency services carried on by the appellant - period upto 31.3.2003 - Held that:- The matter should be considered by the CCE(A) as regards the contentions raised by the assessee in respect of taxability of the services - If the CCE(A) comes to the conclusion that the services during the relevant period were not taxable, then the assessee is entitled to a partial relief from the demand of differential interest, which was remitted by them under protest on 06.10.2008/07.10.2008. The matter is remanded to the CCE(A) to consider the issue regarding taxability of service for the relevant period - Appeal allowed by way of remand. Issues Involved:1. Interpretation of Section 35G(1) of the Central Excise Act, 1944.2. Liability to pay service tax for advertising agency services.3. Applicability of interest for delayed payment of service tax.4. Consideration of limitation period for interest demand.5. Estoppel in raising plea of liability to payment of tax.Issue 1: Interpretation of Section 35G(1) of the Central Excise Act, 1944The appellant filed an appeal under Section 35G(1) challenging a Final Order of the Customs, Excise and Service Tax Appellate Tribunal. The substantial questions of law raised in the appeal pertained to the refusal of the Tribunal to consider the appellant's plea regarding interest payment for an extended period, the limitation period for interest demand, and the estoppel in raising the plea of liability to pay tax. The primary issue was whether the appellant was liable to pay service tax for advertising agency services until 31.3.2003.Issue 2: Liability to Pay Service Tax for Advertising Agency ServicesThe case involved an assessment for the years 2000-01 to 2002-03, where the Revenue noted a delay in service tax payment by the assessee. The assessee claimed to pay service tax based on invoice raised, not on receipt basis. Despite the explanation, the Revenue issued a show cause notice demanding interest for delayed payments. The assessee contested the demand, citing limitation and disputing the tax liability for the period in question.Issue 3: Applicability of Interest for Delayed Payment of Service TaxThe Revenue demanded interest on delayed service tax payments, which the assessee paid partially under protest. The Adjudicating Authority confirmed the interest demand and imposed a penalty. The Commissioner of Central Excise (Appeals) granted partial relief by setting aside the penalty but upholding the interest demand. The Tribunal dismissed the appeal, stating that the appellant could not contest the tax liability to avoid paying differential interest.Issue 4: Consideration of Limitation Period for Interest DemandThe assessee argued that the demand for interest was barred by limitation and that the services provided were not taxable during the relevant period. The Tribunal's decision was based on the assumption that the assessee admitted tax liability and interest payment for a limited period, thus rejecting the appeal against the interest demand. However, the Court emphasized that if the service was not taxable, the question of interest payment did not arise.Issue 5: Estoppel in Raising Plea of Liability to Payment of TaxThe Court found that the assessee's case was peculiar, and even if successful, they could not claim a refund of voluntarily remitted tax and interest. The Court remanded the matter to the Commissioner of Central Excise (Appeals) to consider the taxability of services during the relevant period. If the services were found non-taxable, the assessee would be entitled to relief from the interest demand. The Court highlighted that success in the appeal would not lead to a refund of the tax and interest already paid voluntarily by the assessee.This detailed analysis of the judgment highlights the legal issues involved, the arguments presented by the parties, and the Court's decision regarding the interpretation of the law and the liability to pay service tax for the advertising agency services.