2008 (2) TMI 45 - AT - Service Tax

Tribunal Upholds Interest Demand on Late Service Tax Payment

The Tribunal dismissed the appeal, upholding the demand for interest on the belated service tax payment. The decision was based on the mandatory nature of ... Interest on delayed payment of service tax under Section 75 - Mandatory civil liability for delayed payment - Absence of mens rea not a defence to interest liability - Adjustment of excess tax against interest demand - no enabling provisionInterest on delayed payment of service tax under Section 75 - Mandatory civil liability for delayed payment - Absence of mens rea not a defence to interest liability - Whether the appellants were liable to pay interest under Section 75 for service tax paid belatedly for the period October, 2000 to May, 2002. - HELD THAT: - The Tribunal found that service tax of Rs.4,59,791 for the period October, 2000 to May, 2002 remained unpaid and was paid only on 18-10-2002. Section 75 imposes a mandatory obligation to pay simple interest for delayed crediting of service tax, and that obligation is civil and inescapable. The appellants' contention that the short-payment arose from an arithmetical error and that there was no mens rea or intention to withhold payment was held to be irrelevant to the statutory obligation to pay interest. Consequently, the demand for interest under Section 75 was upheld. [Paras 1]Demand of interest under Section 75 was justified and must be paid.Adjustment of excess tax against interest demand - no enabling provision - Whether the appellants could seek adjustment of an alleged excess service tax payment against the demanded interest. - HELD THAT: - The appellants asserted that an excess payment remained with the department and could be adjusted against the interest demand. The Tribunal noted that no enabling provision was cited to permit such an adjustment and that the plea had not been raised before the lower authorities. In the absence of a statutory basis and lack of earlier invocation, the claim for adjustment was not accepted. [Paras 1]Claim for adjustment of excess tax against the interest demand was not permitted.Final Conclusion: The appeal is dismissed; the appellants are liable to pay the interest demanded under Section 75 for the period October, 2000 to May, 2002, and the asserted excess payment cannot be adjusted against that interest in the absence of an enabling provision and earlier raising of the plea. Issues:Demand of interest on belated service tax payment under Section 75 of the Finance Act, 1994.Analysis:The appellants, a Public Sector Undertaking, appealed against a demand of interest amounting to Rs.1,43,950/- on belatedly paid service tax for the period from October, 2000 to May, 2002. The appeal was made under Section 75 of the Finance Act, 1994, which mandates interest payment for delayed service tax credit to the Central Government. The appellants argued that the short-payment was due to an error in calculation, not suppression, and the tax was promptly paid upon error detection. They contended the absence of mens rea to invoke penal provisions. However, the Tribunal found no merit in the appellants' stance. Despite the error being unintentional, the liability to pay interest under Section 75 was deemed mandatory, irrespective of intent. The Tribunal emphasized that the interest levy was a civil liability, not penal, and was unavoidable under the law. The appellants' claim of excess tax payment available for adjustment against the dues was deemed unsubstantiated as no legal provision for such adjustment was cited, and the plea was not raised before lower authorities.Conclusion:The Tribunal dismissed the appeal, upholding the demand for interest on the belated service tax payment. The decision was based on the mandatory nature of interest payment under Section 75, emphasizing the civil liability aspect and disregarding intent or error as valid considerations under the provision. The absence of legal provision for adjusting excess tax payment against interest dues further weakened the appellants' case.