Appellate Tribunal Upholds Service Tax Demand and Interest on Delayed Payments

The Appellate Tribunal dismissed the appellant's case, upholding the demand for Service Tax and interest. The Tribunal found that interest under Section 75 of the Finance Act, 1994 is linked to the duty payable and must be paid on belated payments, even when the liability itself is questionable. Despite the appellant disputing the chargeability of interest and citing previous cases, the Tribunal held that interest is automatically applicable when there is a delay in payment. The appellant's request for waiver of interest was denied, and the order was pronounced on 17.08.2023.

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Issues:
The appeal against Order-in-Appeal No. 47/2013 dated 23.10.2013 passed by the Commissioner (Appeals), Central Excise and Service Tax, Large Taxpayer Unit, Chennai.

Issue 1:
The Department issued a Show Cause Notice proposing to demand Service Tax on amounts paid towards Royalty and Technical Knowhow to an 'Associated Enterprise'.

The Show Cause Notice was confirmed in Order-in-Original No. LTUC/358/2011-ADC dated 28.10.2011.

Issue 2:
The appellant challenged the demand for Service Tax and interest, primarily disputing the chargeability of interest.

The appellant cited previous cases where similar issues were decided in their favor, requesting waiver of the interest charged.

Judgment:
The Appellate Tribunal considered the contentions of both parties and relevant case laws.

The Tribunal noted that the appellant had paid the tax as demanded but disputed the chargeability of interest only.

The Tribunal referred to previous cases and observed that when the liability itself was questionable, the Revenue is not justified in demanding interest.

Based on this observation, the appellant requested for waiver of the interest charged.

The Tribunal found that the appellant had short-paid the tax but did not question the taxability of the provision made for Royalty and Technical Knowhow.

The Tribunal held that interest under Section 75 is linked to the duty payable and arises automatically by operation of law.

Therefore, the Tribunal dismissed the appellant's case, stating that when there is a delay in payment, interest must be paid on such belated payments in accordance with Section 75 of the Finance Act, 1994.

The order was pronounced in the open court on 17.08.2023.

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