Cheque tender before due date counts as payment on tender date if honoured; delayed return penalty may still stand.

Payment of government dues by cheque tendered before the due date is treated as made on the date of tender, provided the cheque is honoured; bank clearance later does not justify interest or penalty for delayed tax payment. The article also notes that a separate penalty for delayed filing of return may still be sustained where the delay is unexplained and the penalty is not excessive on the facts. On these principles, interest and the penalty for delayed payment were deleted, while the penalty for late return filing was upheld.

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Issues: (i) Whether service tax paid by cheque before the due date but encashed later could be treated as paid on the date of encashment so as to attract interest and penalty. (ii) Whether penalty for delayed filing of return under the relevant provision was justified.

Issue (i): Whether service tax paid by cheque before the due date but encashed later could be treated as paid on the date of encashment so as to attract interest and penalty.

Analysis: Payment of government dues by cheque is permissible, and where the cheque is duly handed over before the due date and is not dishonoured, the payment is to be treated as made on the date of tender of the cheque. The cheque in question was issued before the due date and was ultimately honoured. On that basis, the later date of bank clearance could not be treated as the date of payment for the purpose of demanding interest or imposing penalty for delayed tax payment.

Conclusion: The demand of interest and the penalty imposed for delayed payment were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether penalty for delayed filing of return under the relevant provision was justified.

Analysis: The return was filed with a delay of 18 days, and no sufficient cause was shown to explain the delay. The penalty imposed was also not excessive or unjust on the facts found.

Conclusion: The penalty for delayed filing of return was upheld against the assessee.

Final Conclusion: The order was modified by deleting the interest demand and the penalty for delayed payment, while sustaining the penalty for delayed filing of return.

Ratio Decidendi: Where a cheque tendered towards statutory dues is presented before the due date and is subsequently honoured, payment is treated as made on the date of tender, not on the date of bank clearance; separate penalty for unexplained delay in filing the return may still be sustained.

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