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2019 (3) TMI 1509 - AT - Service TaxDemand of interest and penalty - service tax paid belatedly by adjustment of the CENVAT account - Held that:- When there was sufficient balance in the CENVAT account for payment of service tax, the appellant cannot be burdened with payment of interest. Undoubtedly, though there was sufficient balance in the CENVAT account, the adjustment of the same by causing a debit entry in the CENVAT account has been made by the appellant only on 21.3.2012 when the department was informed about such adjustment from the CENVAT account. The demand therefore stands discharged fully only on 21.3.2012. Merely because the amount was lying in the CENVAT account, it cannot be said that the demand has been paid or discharged. Appellant has discharged the liability of service tax only on21.3.2012 when they informed the department that they are using the CENVAT credit to pay the service tax demand. Service tax has to be paid by the assessee on due dates as prescribed by statute. Whenever the service tax is not paid within such due dates it becomes belated payment. As per section 75 of Finance Act, 1994, liability to pay interest follows in case of belated payment or short-payment of service tax. Merely because there is some balance lying unutilized in the CENVAT account, it cannot be said that the assessee has discharged the liability to pay service tax. The liability to pay service tax will stand discharged only when such payment is made or manifested in the records - The liability to pay service tax will stand discharged only when such payment is made or manifested in the records. Until such payment, or manifestation in the accounts, the assessee is liable to pay interest on the amount of tax. Section 75 does not state that when there is sufficient balance in the CENVAT account and if utilized for payment of service ax, the assessee need not pay any interest - the claim of the assessee that they are not liable to pay interest when the tax amount is adjusted from credit lying in CENVAT account is without any legal basis. In the case of Nicholas Piramal (India) Ltd. (supra), the issue analysed was whether interest is liable to be paid on differential amount when there is credit available and whether penalty imposable. In the said case, credit was availed on inputs which was already reversed by the assessee and no duty was to be paid. Therefore, the question of payment of interest and imposition of penalty was held in favour of the assessee. Time limitation - penalty - Held that:- The appellant is not contesting the tax liability adjusted from CENVAT account. Taking these facts into consideration, the invocation of extended period requires no interference - The argument of the ld. counsel that sub-section (3) of Section 73 would apply is not tenable for the reason that the appellant has not paid up the demand along with entire interest before issuance of show cause notice. The service tax demand of ₹ 11,01,03,335/- having been fully paid up before issuance of show cause notice and part of the interest relating to the cash payment also having been paid up before issuance of show cause notice, the equal penalty imposed under section 78 is unwarranted. The impugned order is modified to the extent of setting aside the penalty imposed under section 78 without disturbing the remaining portion of the impugned order - appeal allowed in part.
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