Wrong bank payment of service tax should be regularised, with no fresh demand, interest, or penalty where liability was already met.

Service tax paid within time into the wrong designated bank, after confusion caused by bifurcation of the Commissionerate, should be regularised by transfer to the authorised bank rather than treated as unpaid. The text states that where the tax liability had already been discharged, demanding the tax again with interest was not justified, and penalty was unsustainable. It further notes that in a new levy like service tax, the administration should adopt a guided and sympathetic approach when the payment obligation has in substance been met.

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Issues: Whether service tax already paid into one designated bank could be demanded again with interest and penalty merely because it was not deposited in the bank authorised for the jurisdiction.

Analysis: The appellants had discharged the tax liability within time, though the amount was paid into the wrong designated bank after confusion caused by bifurcation of the Commissionerate. The appropriate course was to regularise the payment by transfer of the amount to the authorised bank rather than require a fresh payment with interest. In a new levy such as service tax, the tax administration was expected to adopt a guided and sympathetic approach where the liability had already been met.

Conclusion: The demand for payment of tax again with interest was not justified, and the penalty was also unsustainable. The appeal was allowed and the impugned orders were set aside.

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