2018 (10) TMI 661 – CESTAT HYDERABAD – TMI – Demand of interest on delayed payment of service tax – whether the demand of interest on the service tax by the Department is sustainable?
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Held that:- The service tax law does not provide any limitation for demand of interest on service tax – However, the Hon’ble Supreme Court has, in the case of T.V.S. Whirlpool Ltd., [1999 (10) TMI 701 – SUPREME COURT OF INDIA] laid down the law that the period of limitation which applies to the principal amount also apply to the interest thereon. This judgment was passed under the Customs Act which also did not have the period of limitation for demand of interest during the relevant period.
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The demand of interest is liable to be set aside on the ground of limitation of time because not only is there no evidence of elements required to invoke extended period in the show cause notice, there is not even any allegation that the interest has not been paid by reasons of fraud, collusion, willful m
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ances received by them and also imposed a penalty under Section 77 of the Act, 1994. Aggrieved, the appellant approached the First Appellate Authority who, upheld the Order-in- Original and dismissed the appeal. Hence this appeal. 2. Learned Counsel for the appellant took the bench through the facts of the case and said that the only point of dispute at present is the demand of interest on delayed payment of service tax on advances received by them from their customers. He admits that the demand of service tax should have been paid on the date of receipt and they have paid the service tax late. He however, argues that the interest on such delayed payment also has to be demanded within the time limit laid down for recovery of service tax i.e., 18 months and within extended period 5 years can be invoked in case of fraud, collusion, willful mis-statement etc. These elements have not been proved and therefore, demand of payment of interest on service tax is time barred. He relied on the ci
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ng recovery of interest. He, however, relied on the following case laws to buttress his case that the demand is hit by limitation of time. i) Commissioner Vs. T.V.S. Whirpool Ltd., [2000 (119) ELT A177] in which, Hon ble Supreme Court held that the period of limitation that applies to a claim for the principal amount should also apply to the claim for interest thereon under the Customs Act. ii) Canara Bank Vs. Commissioner of Central Excise & Customs, LTU, Bangalore [2016 (45) STR 214 (Tri.-Bang.)] in which, it was held that the period of limitation applies to claim of interest under Section 75 of the Finance Act, 1994. iii) Oil & Natural Gas Corporation Ltd., Vs. Commissioner of Central Excise & Service Tax, Surat [2015 (38) STR (867) (Tri.-Ahmd.)] iv) Bank of Baroda Vs. Commissioner of Service Tax, Mumbai [2015 (40) STR 1069 (Tri.-Mumbai)] v) V. Mathialagan Vs. Commissioner of Central Excise, Puducherry [2018-TIOL-1509-CESTAT-MAD] Even on merits, the appellants argued tha
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de the time limitation applicable to the interest as well. 4. I have considered the arguments on both sides. The only point to be decided is whether the demand of interest on the service tax by the Department is sustainable. I find that the service tax law does not provide any limitation for demand of interest on service tax. However, the Hon ble Supreme Court has, in the case of T.V.S. Whirlpool Ltd., (supra) laid down the law that the period of limitation which applies to the principal amount also apply to the interest thereon. This judgment was passed under the Customs Act which also did not have the period of limitation for demand of interest during the relevant period. The ratio of this judgment has been followed in several orders passed by the Tribunal indicated above. Respectfully following the same, I, hold that the demand of interest is liable to be set aside on the ground of limitation of time because not only is there no evidence of elements required to invoke extended perio
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