Mandatory interest for delayed service tax payment sustained only for proven delays; clerical return error defeated the balance demand.

Interest under section 75 of the Finance Act, 1994 is mandatory for delayed payment of service tax, so liability attached for the two invoices where payment was delayed by six days and two days respectively. For the remaining entries, the interest demand could not be sustained because the ST-3 returns showed a wrong quarter entry, and the invoices and payment dates supported the explanation that this was only a clerical mistake with tax otherwise paid in time. The result was that interest survived only to the extent of the proven delays, while the balance demand was set aside.

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Issues: Whether the demand of interest for delayed payment of service tax was sustainable in respect of the admitted delayed invoices and whether the remaining interest demand could survive when the ST-3 returns contained a typographical error regarding the relevant quarter.

Analysis: Interest under section 75 of the Finance Act, 1994 is mandatory when tax is not credited within the prescribed period, and even a short delay attracts liability. On the admitted facts, there was delay of six days in one invoice and two days in another, so interest was rightly payable to that extent. For the remaining entries, the record showed that the invoices pertained to January to March 2015, while the ST-3 returns wrongly reflected October to December 2014, which supported the explanation that the incorrect quarter entry was only a clerical mistake. The payment dates for those entries also showed that, except for the two admitted delays, the tax had been paid within time.

Conclusion: The interest demand was sustained only for the two admitted delayed payments and was set aside for the remaining disputed entries.

Final Conclusion: The appeal succeeded only in part, with the late-fee liability left undisturbed and the interest demand reduced to the extent of the proven delays.

Ratio Decidendi: Interest for delayed payment of tax is mandatory for the period of actual delay, but a demand cannot be sustained for entries proved to have been wrongly mapped in the return due to a clerical mistake.

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