2025 (9) TMI 934 - AT - Service Tax

Appeal partly allowed: Section 75 interest sustained only for two admitted late invoices; other interest quashed

M/s AKC & SIG Versus Commissioner of CGST And Central Excise, Jabalpur (MP)

CESTAT held the appeal partly allowed. The appellant's acknowledgment of liability for late fee meant no dispute on that demand; however, interest under ... Non-payment of late fee in terms of Rule 76 of Service Tax Rules, 1994 read with Section 70 of Finance Act, 1994 - liability to pay interest as prescribed under Section 75 of the Finance Act, 1994 - HELD THAT:- Since the appellant has acknowledged their liability of paying late fee no finding are required on the first demand under challenge. With respect to demand of interest of Rs. 2,57,814/-, it is observed that in terms of Section 75 of the Service Tax Act, every person, liable to pay tax in accordance with the provisions of section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of Central Government within the period prescribed, is required to pay simple interest at such rate as is mentioned in the said Section 75. It is also perused that Section uses word “shall” which makes it mandatory that the delay of any miniscule number of days shall invite the interest liability. Thus, it is clear that whenever there will occur delay in making payment of tax from the due date, the assessee is liable to pay tax. It is observed that admittedly, there occurred a delay with respect to invoice dated 17.12.2014 for the quarter October to December financial year 2014-15 where due date was 6th Jan. 2015 but the service tax was paid on 12 Jan. 2015 thereby resulting into delay of six days of paying service tax. There is also admission about delay of two days with respect to invoice dated 21.12.2015 issued during quarter October to December financial year 2015-16. The due date for paying tax was 6th January 2016. However, the tax was paid on 8 Jan. 2016. These admitted facts are sufficient to confirm demand of interest with respect to the said two invoices. To this extent the order under challenge is held to be sustainable. The payment of tax is subsequent to the receipt of invoices. This particular perusal makes it abundantly clear that the payment of service tax for the invoice dated Jan, Feb. March 2015 cannot be reflected in the ST-3 returns filed for the quarter October to December 2014. This observation is sufficient to hold that there had occurred a typographical error in the ST-3 returns. The table reflected in para 7.1. of the order row reveals that all other rows of the column except for row no. 1 and second last row the payment of tax has been made well within time. It is accordingly, held that interest for those invoices has wrongly been confirmed. The appeal is partly allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether interest under Section 75 of the Finance Act, 1994 (Service Tax) is mandatorily leviable where there is delay in crediting service tax to Government account even for a short period. 2. Whether the demand of interest computed on multiple entries is sustainable where (a) certain payments are admittedly delayed and (b) other ST-3 return entries reflect an incorrect quarter due to a typographical/error in filing (i.e., whether interest confirmed for entries that actually relate to a subsequent quarter is maintainable). 3. Whether the demand of late fee under Rule 76 read with Section 70 (as conceded by the appellant) or any aspect of limitation/time-bar on the show cause was determinative of the appeal (issue limited to the Court's consideration of the appellant's contention of time-bar as pleaded). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Liability to pay interest under Section 75 for delayed payment Legal framework: Section 75 (Finance Act, 1994) prescribes payment of simple interest where any person liable to pay tax under section 68 or rules made thereunder fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed. The provision uses 'shall', indicating mandatory operation. Precedent treatment: Authorities were cited by the appellant (list of cases before the Tribunal) but the Tribunal's reasoning turns primarily on the statutory text of Section 75 rather than treating those precedents as determinative. No precedent was overruled. Interpretation and reasoning: The Tribunal interprets the mandatory 'shall' in Section 75 as imposing an obligation to pay interest for any delay, however small. The Court holds that delay occurring after the due date triggers interest liability; thus statutory language makes interest mandatory on delayed credit of tax. Ratio vs. Obiter: Ratio - Section 75's mandatory wording results in liability for interest on any delay in depositing service tax within prescribed period. Obiter - General observations about inevitability of interest for even 'miniscule number of days' are explanatory of the ratio. Conclusion: Interest under Section 75 is mandatorily leviable where tax is credited after the prescribed due date; therefore confirmed interest is sustainable as to periods where delay is admitted. Issue 2 - Sustainment of interest demand where ST-3 returns contain a typographical/filing error as to quarter Legal framework: Assessment of interest requires aligning the date of invoice, the correct quarter to which the tax pertains, the statutory due date for deposit for that quarter, and the actual date of payment as reflected in ST-3 returns and payment records. If ST-3 return entry misstates the relevant quarter, the temporal basis for interest may be incorrect. Precedent treatment: Appellant relied on several authorities supporting relief in cases of recordal errors/clerical mistakes; the Tribunal considered the factual matrix and documentary evidence (invoices, payment records) rather than mechanically applying cited precedents. Interpretation and reasoning: The Tribunal examined invoices and payment chronology. For two invoices (17.12.2014 and 21.12.2015) delays were admitted (6 days and 2 days respectively) and interest on those was confirmed. For other entries (Sr. No.2-6 in the impugned table), invoices bore dates in Jan/Feb/Mar 2015, and payments occurred subsequent to receipt of those invoices. The ST-3 returns, however, recorded these payments against the quarter October-December 2014-an inconsistency the Tribunal attributed to a typographical error in ST-3 filing. Because the payments and invoices demonstrably pertained to the subsequent quarter, the statutory due date for the recorded quarter could not be correctly applied, and interest calculation based on the incorrect quarter was unsustainable. Ratio vs. Obiter: Ratio - Where documentary evidence (invoices/payment dates) proves that ST-3 entries misrecorded the relevant quarter, interest demand calculated on the basis of the incorrectly recorded quarter cannot be sustained. Obiter - Observations on accountant error/typographical mistakes explain the application of evidence to statutory timelines. Conclusion: Interest demand is sustainable only for those invoices where delay is admitted (two specific invoices). Interest confirmed for other entries that were misclassified in ST-3 returns (typographical error identifying earlier quarter) is set aside; the appeal is partly allowed to that extent. Issue 3 - Late fee admission and contention of time-bar on show cause notice Legal framework: Rule 76 read with Section 70 prescribes late fee for delayed filing of ST-3 returns; issuance of show cause notices is subject to applicable limitation principles though the Tribunal's consideration is tied to evidentiary findings. Precedent treatment: Appellant raised reliance on precedents concerning limitation/time-bar, but the Tribunal's decision rests on documentary chronology and admissions rather than an extended adjudication on limitation doctrine. Interpretation and reasoning: The appellant conceded liability for late fee; therefore no finding was required on that demand. The appellant's plea that the show cause notice was barred by time was mentioned but not given substantive treatment in the order beyond resolution of the evidentiary inconsistencies on the returns/payments. The Tribunal proceeded to adjudicate interest on admitted delays and misrecorded entries. Ratio vs. Obiter: Ratio - Where the appellant admits liability for late fee, the Tribunal need not adjudicate that demand. Obiter - The limited mention of time-bar is not a decision on limitation and does not form part of the operative ratio. Conclusion: Late fee demand stands as conceded; the contention that the show cause notice was time-barred was not determinative of the outcome and no separate ruling on limitation was rendered. Cross-reference See Issue 1 and Issue 2: The Tribunal's mandatory reading of Section 75 (Issue 1) governs admitted delays (Issue 2 first part), while evidentiary correction of ST-3 entries (Issue 2 second part) negates interest computed on misclassified quarters despite the mandatory nature of Section 75.