Compensatory interest on delayed service tax deposit applies despite bureaucratic delay, as statutory liability follows late payment.

Interest under Section 75 of the Finance Act, 1994 applies when service tax is deposited after the prescribed due date, because the levy is compensatory and follows the delay itself. Administrative or bureaucratic constraints do not extinguish the statutory liability once tax has been withheld beyond time. The belated deposit was therefore liable to interest at the applicable rate, and the challenge to the levy was rejected.

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Issues: Whether interest under Section 75 of the Finance Act, 1994 was payable on service tax deposited after the due date, notwithstanding that the delay was attributed to bureaucratic constraints and the appellant being a Government department.

Analysis: The delayed deposit of service tax was undisputed. Interest under Section 75 is compensatory in nature and follows from failure to credit tax within the prescribed time. The reason for delay, including administrative or bureaucratic difficulties, does not extinguish the statutory liability to pay interest once tax has been withheld beyond the due date. The delayed payment was therefore liable to interest at the applicable rate.

Conclusion: The appellant was liable to pay interest on the belatedly deposited service tax, and the contention against levy of interest was rejected.

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