By TIOL News Service

MUMBAI, OCT 17, 2014: THIS is a Revenue appeal against an order passed by the Commissioner of Service Tax, Mumbai in September, 2008.

For the month of October 2006, the tax liability was required to be discharged by the respondent by 05/11/2006 and for the month of January 2007 by 05/02/2007. Both these tax liabilities were discharged by the appellant by debit in the CENVAT credit account only on 15/02/2007. Therefore, in respect of the payment of duty on 05/11/2006 there was a delay of 102 days and in respect of payment of duty on 05/02/2007 there was a delay of 10 days.

A SCN was issued demanding interest u/s 75 of the FA, 1994.

It is the case of the Revenue that the Commissioner had incorrectly held that the liability to pay interest would not arise on account of delay as the appellant had enough CENVAT credit to discharge the tax liability.

Inasmuch as the Revenue contends that the interest liability would work out to Rs.16,98,100/- as against Rs.51,403/- paid by the appellant and, therefore, they are in appeal before the CESTAT.

The Bench held -

++ The question of payment of tax is a simple fact. Tax can be paid either in cash or by debit in the CENVAT credit account or by way of both. If the tax is paid through the CENVAT credit, it is the date of debit in the CENVAT account which is the date of payment of tax.

++ Merely, because the credit is available in the books of accounts, it does not mean that the tax has been paid . Therefore, the liability to pay interest has to be computed from the due date of payment of tax to the actual date of payment.

++ If viewed from this perspective, in the present case, inasmuch as the tax has been paid only on 15/02/2007 by debit in the CENVAT account, whereas the due dates for payment of tax were 05/11/2006 and 05/02/2007, there are delays of 102 days and 10 days in payment of tax and for these delays, the respondent is certainly liable to pay interest.

++ The impugned order is set aside to the extent of dropping of interest liability and we hold that the respondent is liable to pay interest for the above period of 102 days and 10 days respectively as proposed in the show cause notice.

The Revenue appeal was allowed.

In passing : A six year wait for interest calls for interest !

(See 2014-TIOL-2020-CESTAT-MUM)