Appellants cannot claim interest waiver on delayed service tax payment under amnesty scheme for imported services

CESTAT Hyderabad dismissed the appeal where appellants sought waiver of interest on delayed service tax payment made under amnesty scheme for imported services from USA under Reverse Charge Mechanism. The tribunal held that interest payment is automatic corollary to tax payment and cannot be waived even under amnesty schemes. Having accepted service tax liability without dispute, appellants cannot seek exemption from applicable interest. The refund claim was also rejected as payment was made after audit detection under amnesty provisions, making credit inadmissible under Rule 9(1)(bb).

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Issues Involved:
The issues involved in the judgment are:
1. Liability to pay Service Tax under Reverse Charge Mechanism and imposition of penalty.
2. Claim for refund of Service Tax paid under Section 142(7)(b) of CGST Act, 2017.

Issue 1: Liability to pay Service Tax under Reverse Charge Mechanism and imposition of penalty:

The appellants, engaged in providing various taxable services, incurred expenditure towards Import of Services without discharging Service Tax under Reverse Charge Mechanism. A show cause notice was issued demanding Service Tax for a specific period, imposing penalty. The Deputy Commissioner confirmed the proposals, including the penalty. On appeal, the Commissioner upheld the order setting aside the penalty. The appellant then filed an appeal, arguing that interest paid should waive the penalty, citing an Amnesty Scheme. However, the Tribunal held that interest is automatic with the payment of tax, rejecting the appellant's argument that interest is not payable due to delayed notification. The Tribunal emphasized that payment of interest is a corollary to the payment of tax, and the liability is automatic, thus upholding the liability to pay interest on the Service Tax.

Issue 2: Claim for refund of Service Tax paid under Section 142(7)(b) of CGST Act, 2017:

The appellants requested a refund of Service Tax paid, contending that it should be refunded under Section 142(7)(b) of CGST Act, 2017. The Deputy Commissioner rejected the refund claim, citing provisions related to CENVAT credit admissibility. The appellants argued that they were eligible for refund and relied on various cases to support their claim. However, the Tribunal found that the appellants had not challenged the payment of Service Tax and had accepted the department's contention. The Tribunal also noted that the clarification issued by CBIC was akin to an Amnesty Scheme, granting immunity from penalty if the tax was paid with interest. Therefore, the Tribunal held that the admissibility of credit is subject to specific provisions, rejecting the appeals and upholding the department's decision to reject the refund claim.

(Order pronounced in the open court on 16.04.2024)

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