Limitation on interest demand for delayed service tax payment barred recovery where notice was issued beyond the prescribed period.

Interest demanded for delayed service tax payment was found time-barred because the show cause notices were issued after the applicable limitation period. The text states that the contention of automatic accrual of interest did not save the demand, as a notice had been issued for recovery of interest and the limitation governing the principal demand was applied to the interest claim as well. On that basis, the interest demand was set aside and the assessee succeeded on the issue.

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Issues: Whether the demand of interest for delayed payment of service tax was sustainable when the show cause notice was issued beyond the limitation period.

Analysis: The demand related to delayed payment for the period 01.03.2013 to 31.03.2014, but the show cause notices were issued only on 31.12.2020. The contention that interest accrues automatically did not assist the Revenue in the facts of the case, because a notice had in fact been issued for recovery of interest. Applying the principle that the limitation applicable to the principal demand would govern the claim for interest as well, the demand was found to be time-barred.

Conclusion: The demand of interest was barred by limitation and could not be sustained; the assessee succeeded on this issue.

Final Conclusion: The interest demand was set aside and the appeals were allowed.

Ratio Decidendi: Where a show cause notice seeking interest is issued beyond the applicable limitation period, the claim for interest is also time-barred and cannot be enforced.

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