TMI Blog2018 (7) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... be quantified till the arrears of tax are paid and it is consequently not possible to specify a definite figure in the recovery certificate. However in case of nonpayment of the interest along with the tax arrears if a notice demanding such interest is to be issued the same should be issued within reasonable time from the date of payment of tax arrears. There can be no dispute that interest on the service tax short paid and paid subsequently either on own volition or on being pointed out by the department, is required to be paid and if not paid suitable action for the recovery of the interest needs to be initiated against the defaulting entity - thus, the demand of interest upheld. Penalty - Held that:- The case is pure of short payment of taxes due on the due on the due date. It is not the case of the department that appellant has suppressed the value of taxable service or has not declared the same to the department. Further entire amount of tax paid by the appellant on reverse charge was available to the Appellant as CENVAT credit there can be no question of intention to evade payment of tax - Since Appellant was paying the taxes on reverse charge basis in respect of Inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant, demanding interest on the delayed payment of service tax and also proposing to impose penalty on the appellant under Section 78 for short payment of the Service Tax due by suppressing material facts in respect of the Information Technology Software Services received by them. Show Cause Notice also proposed penalty under Section 77(1)(a) for contravention of the provisions Section 69(2) of the Act read with Rule 4 of Service Tax Rules, 1994 as they have not obtained registration in respect of Information Technology Software Services received by them from their overseas provider of services. e. The said show cause notice has been adjudicated by the Commissioner Central Excise Pune III. The text of the order is reproduced below: (i) I order that the noticee shall pay the interest amounting to ₹ 40,58,140/- (Rupees Forty Lakhs Fifty Eight Thousand One Hundred Forty only) under Section 75 of Act. (ii) I hereby impose a penalty of ₹ 74,92,646/- (Rupees Seventy Four Lakhs Ninety Two Thousand Six Hundred and Forty Six Only) under the provisions of Section 78 of the Act. I further order that, the penalty shall stand reduced to ₹ 18,73,162/- (Rupees Eig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice, the act of not obtaining registration in respect of the said service cannot be but a procedural lapse and hence no penalty should be imposed under section 77(1)(a). 4. Shri Vivek Dwivedi, Authorized Representative appeared on behalf of the department. He submitted that it is fact that there was delay in payment of the service tax from the due date. Since there was delay in payment of service tax, in terms of Section 75 of the Finance Act, 1994 interest at the prescribed rate also was required to be paid for the period of delay. Further appellant has failed to obtain registration in respect of these services received by them at the appropriate time and hence have contravened the provisions of Section 69(2) of the Act read with Rule 4 of Service Tax Rules, 1994 and hence penalty has been rightly imposed under Section 77(1)(a) of the Finance Act, 1994. Further since appellant has short paid the service tax due at the time when it was required to be paid, by suppressing material facts from the department penalty under section 78 is justified. He reiterated the findings recorded by the Commissioner in her order. 5. We have considered the submissions made. 6. Since the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. 8. Further in terms of Section 67A of the Finance Act, 1994, inserted w.e.f 2012, the rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. Thus in terms of this Section, the applicable rate of service tax shall be the one prevailing at the time when a taxable service is provided or agreed to be provided. Thus even in terms of the amendments made subsequently by way of insertion in terms of Section 67A, the rate of service tax shall be the rate in force at the time when service is provided. 9. Hence in our considered view there is no dispute with reference to applicable rate of tax in respect of the Information Technology Software Services received by the Appellant during the month of 2009. Since the rate of taxation was reduced from 12% to 10% with effect from 24th February 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Provided that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupees during any of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by three per cent per annum. From plain reading of the above provision it is quite evident that interest is compensatory in nature and is required to be paid by the tax payer in case of any default in payment of tax for the period of default. Issue with regards to statutory levy of interest is no longer res integra. Bombay High Court has in case of Commissioner Of Central Excise vs Padmashri V.V. Patil Sahakari Sakhar Karkhana Ltd. [2007 (215) ELT 23 Bom] has held as follows: 10. So far as interest Under Section 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. In the case of STO v. Dwarika Prasad Sheo Karan Dass 1977 1 SCC 22 this Court has held that the assessee is liable to pay interest under section 8(1-a) of the u.p sales tax act, 1948 on unpaid amount of tax and that such liability arises automatically by operation of law. This Court also held that fresh notice of demand was not necessary where amount of tax or other dues were reduced as a result of the appeal, revision or other proceedings.1 13. This Court had occasion to consider subsection (1-A) of Section 8 of the Act in the case of Haji Lal Mohd. Biri Works v. State of U.P 1974 3 SCC 137and held that the liability to pay interest under Section 8(1-A) of the Act is automatic and arises by operation of law. It was further observed in that case that it is not necessary for the Sales Tax Officer to specify the amount of interest in the recovery certificate. 14. This Court had also considered the question whether it was necessary for the Sales Tax Officer to issue a fresh notice of demand to the respondent after the tax assessed by the Sales Tax Officer was reduced on appeal and further reduced on revision. This Court after considering sub-section (9) which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was after nearly four years. There was no demand of interest in the assessment order which, in our opinion, forms part of the assessment order. As the assessment order did not include a claim for interest, the demand for interest had to be made within a reasonable period thereafter. To be noted that for rectification of the assessment order, a limitation period of three years is laid down. Since the demand of interest was made after almost four years, we hold that the demand is not within a reasonable period and the assessee is not liable to pay the interest as demanded. The Department is not entitled to recover the interest from the respondent assessee but is at liberty to recover the amount of interest demanded from the assessing officer concerned who has not taken steps for four years. 14. Hon ble Supreme Court has in case Haji Lal Mohd.Biri Works, Allahabad Through Abdul Hamid Versus State Of Uttar Pradesh [1974 (3) SCC 137] has held as follows: 6 Mr. Sen on behalf of the appellant has argued that it was essential for the Sales Tax Officer to make an assessment order in respect of the interest before he could issue recovery certificate against the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to commence and the date up to which interest is to be counted are all known. It is, therefore, a matter of mere arithmetical calculation to arrive at the figure of interest. We find nothing in any of the provisions of the Act as may warrant making of another assessment order by the Sales Tax Officer regarding the amount of interest or making it obligatory for him to issue a demand notice in respect of the interest before sending the recovery certificate to the Collector. 8 We are also not impressed by Mr. Sen's argument that the Sales Tax Officer should specify the amount of interest in the recovery certificate. As the amount of interest would go on increasing every day till the recovery of the sales tax, it is plainly not possible to specify the exact amount of interest in the recovery certificate. The exact amount of interest can only be known on the day the arrears of sales tax are paid. No elaborate procedure is required for determining the amount of interest because, as mentioned earlier, it is a matter of simple arithmetical calculation. 15. In light of the above decisions of the Apex Court the propositions raised can be answered as follows: i. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced from 12% to 10% with effect from 24.02.2009, Appellant had paid the tax in respect of all the services received during the month of February 2009 paid the tax @ 10% which was applicable on the date when the overseas supplier had raised the invoice. Even if we hold that the act of short payment of taxes was in contravention of the provisions of the Finance Act, 1994 and rules made there under, we are of the opinion that this case is fit case for allowing the benefit under section 80. 17.3 Appellant had been paying the taxes in respect of Information Technology Software Services received by them from their overseas service provider and were also declaring the same in the return filed by them. The only mistake they committed was that they had not taken the registration in respect of the said services. Since Appellant was paying the taxes on reverse charge basis in respect of Information Technology Software Services, the delay in seeking registration for the same can be condoned without any penal consequences in term of Section 80 of the Finance Act, 1994. 17.4 Section 80 of the Finance Act, 1994 reads as follows: Notwithstanding anything contained in the provisions of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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