Service tax interest on delayed remittance was set aside where payment followed client disbursement and CISF exemption guidance applied.

Interest on delayed service tax remittance was found unsustainable where the tax was paid after receipt of consideration from the client and one portion had already been paid before the show cause notice. The liability arose because service tax had not been charged initially and payment depended on client disbursement, while the exemption circular applicable to CISF security services was also considered. On these facts, the delay in remittance was not treated as justifying confirmation of interest, and the demand was set aside in favour of the assessee.

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Issues: Whether interest confirmed on the service tax amounts was sustainable when the tax was paid after receipt of consideration from the client and in the factual backdrop of the exemption circular applicable to CISF security services.

Analysis: The documentary record showed that one amount had been paid even before the show cause notice, and the balance amount was remitted immediately after receipt of payment from the client. The liability arose only because the appellant had not initially charged service tax and had to await disbursement from the client. The exemption circular applicable to CISF services was also taken into account, and on these facts the delay in remittance was not treated as warranting confirmation of interest.

Conclusion: The interest demand was not sustainable and was set aside in favour of the assessee.

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