Payment of interest when duty is confirmed by CESTAT

[Asked by Guest]

In my case SCN was given by Dept which was contested by me and Commissioner (A) held that service tax was paid correctly and no more duty can be demanded. Commissioner (A) also set aside Penalty and Interest.  Dept went in appeal and CESTAT has set aside the duty demand beyond normal limitation and allowed demand only during normal limitation. Penalty is set aside but no order on Interest. Am I liable to pay any Interest on duty confirmed by CESTAT? Please provide solution with supporting case laws if possible. Thanking in anticipation.  

[Brijesh Verma]

Dear Prakash

Once the matter has been adjudicated by Tribunal, and you feel no need to contest it at higher forum, then interest would be payable. 
Interest is an automatic consequence under the present scheme of service tax law. You may also note that since the commissioner (A) truncated all demands, hence interest was automatically removed.

So now, when demand persists on account of CESTAT order, in my view interest is definitely payable. 

Thanx Mr. Brijesh.

[Rakesh Chitkara]

I endorse view of Mr. Brijesh Verma. Interest is not in the nature of penalty. No tax, no interest. If tax is payable, interest is automatic. It is termed as "compensatory payment". Even if the SCN makes no mention of interest, it is till payable. 

Interest will have to be paid in cash. However, you can consider payment of tax through CENVAT, although Department may not be happy with it and will try to push you to pay in cash. Stand firm.

As regards case-laws : "compensatory payment" is the key word to search. There are numerous SC judgments on the issue.

 

[YAGAY and SUN]

Interest in this matter is statutorily required to be paid.  There is no waiver on the interest if tax is payable.

[rajkumar shukla]

PL inform the date from which interest will be payable.Will it  be date of CESTAT order on reduced portion or from the date of OIO on the reduced portion.This assumes significance because comm(A) had set aside the oio.

[Rakesh Chitkara]

Interest is due from the date of non-payment of tax. Please consult your SCN for the period the tax has been demanded, as confirmed by the CESTAT. It would probably the 12 months period immediately preceding the issuance of SCN. Order of Commr.(A) does not survive. Date of order of CESTAT or of Adjudication Order are irrelevant. Mind you, there is no interest on interest.

AI Summary

Interest as compensatory payment: liability arises when duty is confirmed on appeal, payable from date of non payment.
Interest on duty sustained on appeal is an automatic statutory consequence described as a compensatory payment, payable even if not mentioned in the SCN. An earlier order truncating demands does not negate interest on the portion confirmed by the appellate order. Interest accrues from the date of non payment for the period of duty confirmed and there is no interest on interest. Payment is typically required in cash, though taxpayers may attempt CENVAT adjustment.