Service tax liability clarified: Company not liable for pre-recipient obligation. Interest demand vacated.

The Tribunal found that M/s.Tamilnadu Petroproducts Ltd. was not liable to pay the service tax it had paid before the recipient became liable. The lower authorities deemed the credit taken by the company as incorrect and demanded interest for the delay in reversing it. However, the assessing authority approved the payment of the impugned tax as correct for the relevant period. Consequently, the demand for interest was vacated, and the appeal was allowed, with the stay petition also being disposed of.

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Issues:
1. Liability of service tax payment prior to 1.1.2005
2. Assessment of credit taken by the assessee
3. Demand of interest and penalty

Analysis:
1. The case involves M/s.Tamilnadu Petroproducts Ltd. (TPL) paying service tax for "Goods Transport Agents Service" (GTA service) before the recipient became liable. The company later took credit on 1.4.05, which was paid on 31.3.05. The assessing authority assessed the ST-3 return for September 2005, including the impugned service tax payment. No irregularity was found by the assessing authority regarding the tax payment.

2. Subsequently, proceedings were initiated to recover the credit taken by TPL, deeming it as incorrect. The original authority confirmed the demand, imposed a penalty of Rs.5000, and demanded interest. The impugned order upheld the original decision, except for vacating the penalty. The application sought waiver of predeposit of interest and stay of recovery. The appeal was taken up for final hearing with consent.

3. The Tribunal found that TPL was not liable to pay the service tax it had paid on 31.3.05. The lower authorities held that availing credit on 1.4.05 was wrong and demanded interest for the delay in reversing it. However, the assessing authority approved the payment of the impugned tax as correct for the half-year 2005. Therefore, it was deemed incorrect to hold TPL liable for interest on the delayed reversal of credit. The demand for interest was vacated, and the appeal was allowed, disposing of the stay petition as well.

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