Section 68 of the Finance Act, 1994 ('Act' for short) provides for the payment of service tax. Every person providing taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed. Section 68 fixes the responsibility on the service provider for the payment of service tax. Rule 6(1) of Service Tax Rules, 1994 provides that the service tax shall be paid to the credit of the Central Government-
> By the 6th day of the month, if the duty is deposited electronically through internet banking; and
> By the 5th day of the month, in any other case,
Immediately following the calendar month in which the payments are received, towards the value of taxable services. If the assessee is an individual or proprietary firm or partnership firm, the service tax shall paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically through internet banking, or in any other case, the 5th day of the month, as the case may be, immediately following the quarter in which the payments are received, towards the value of taxable services. The service tax on the value of taxable services received during the month of March, or the quarter ending March, as the case may be shall be paid to the credit of Central Government by 31st day of March of the calendar year.
Section 75 of the Act provides for the payment of interest on delayed payment of service tax. This section provides that every person, liable to pay the tax in accordance with the provisions of Section 68 of the Act or Rules made there under, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at the rate now below ten per cent and not exceeding thirty six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette for the period by which such crediting of the tax or any part thereof is delayed. At present the prescribed rate of interest is 13%.
The Act provides of levying of penalty in case of delayed payment of service tax or with intent to evade service tax or suppressing the facts. Section 80 of the Act provides for the waiver of penalty in case reasonable cause is shown by the service provider. But it is not the case for interest. Levying of interest in case of delayed payment is mandatory. No waiver could be made in the payment of interest.
In re 'G.R. Constructions' - 2009 (15) STR 133 (Commr. Appl) it was held that the appellant has paid the service tax amount as soon as he came to know about his tax liability. The contention of the appellant that non payment of tax is due to bona fide error is acceptable. In accordance with the provisions of Section 80 of the Act, the appellant is not liable for penalties under Sections 76, 77 and 78 of the Finance Act, 1994 but it was held that the appellants are liable to pay interest on the amounts confirmed.
In 'Reliance Security Agency V. Commissioner of Central Excise, Thiruvananthapuram' - [2009 -TMI - 33875 - CESTAT, BANGALORE] the major amount has been paid by the appellants before the issue of show cause notice. The appellants have questioned the valuation of the service tax in the Kerala High Court for inclusion of certain amounts and the decision is still pending. In view of the factors the penalty imposed to the tune of Rs.10,000/- is not justified. The tribunal set aside the penalty. However, the tribunal held that the interest has to be paid in accordance with law.
In 'Bholanath Oberoi & Sons V. Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar - I' - [2009 -TMI - 34131 - CESTAT, KOLKATA] the appellants are not contesting the service tax amount which has been paid by them before the issue of show cause notice, and the penalties have been waived by the lower Appellate Authority. The challenge is only in respect of the interest amount on delayed payment of service tax confirmed by the lower Appellate Authority. The appellants prayed for waiver of interest since he has paid the service tax before the issue of show cause notice. The appellants further contended that the appellants did not receive the service tax from their clients earlier but received the same after some delay and since they have immediately thereafter, paid the service tax to the credit of the Government. Therefore, according to the appellants, there should be no liability to pay the interest. Since the tax was paid prior to the issue of show cause notice, on that ground also, no interest should be chargeable.
The tribunal found that there is no dispute that the appellants have paid the service tax after a delay from the date of receiving the taxable value from their clients. The law casts an obligation on the appellants to pay the tax in a particular manner and by a particular date. A tax payer cannot choose a date to pay the tax according to his own sweet will, as that would lead to anarchy in the tax administration. The plea that the tax has been paid before issue of show cause notice cannot be a reason for not charging interest on the tax which is a civil liability dependent on withholding the payment of tax from the due date till the date of payment.
The tribunal also found that the plea that the tax amount was received from the clients later on is not a valid plea. There is no obligation on the part of the clients of the appellants to pay the service tax. The obligation is case on the appellants who are service providers. A plain reading of Rule 6(1) in the context of the objective of the law, clearly shows that the reference to the due date is the date of receipt of the value of taxable services and not the receipt of the service tax from the service recipients, as no obligation to pay tax is on such recipients. There are cases where the recipients pay a consolidated amount and not taxable value and tax separately. In such case the tribunal held that the consolidated amount would be deemed to be inclusive of tax and the tax amount payable has to be calculated treating such amount as the cum-tax value. Since the appellants had received the value of taxable services earlier, they had an obligation to pay the tax by the due dates and not having done so, they are required to pay the interest towards the delayed payment of service tax.
Thus the payment of interest under the provisions of service tax for the delay in payment of service tax is mandatory and there would be no cause to waive the same. The due date for payment of service tax is considered on the payment of value of taxable service, which such payment included service tax or not. If service tax is not included in such payment, then the payment should be taken as cum-tax value and the service provider is liable to pay service tax accordingly.