By TIOL News Service

AHMEDABAD, FEB 25, 2015: THE CERA audit party found that although the assessee was making cash payment of service tax on monthly basis, but that part of service tax, which was required to be paid monthly by debiting CENVAT credit account, was paid on quarterly basis.

It appeared to the department that duty amount of Rs. 6,16,54,216/- was paid belatedly on which interest of Rs. 5,77,943/- was payable by the appellant.

The adjudicating authority confirmed the demand of interest but refrained from imposing any penalty citing section 80 of the FA, 1994.

The appellant is before the CESTAT. Nothing is heard from the Revenue side regarding dropping of penalty.

Be that as it may, before the CESTAT the appellant submitted that they had sufficient credit in the CENVAT account all the while but they were under the bonafide belief that the duty part to be debited from CENVAT account was required to be made on quarterly basis and not monthly basis and hence there should be no interest liability. The appellant also argued that the adjudicating authority had wrongly held that no time limit is applicable for raising the demand of interest. Reliance is placed on the decision in Hindustan Insecticides Ltd. - 2013-TIOL-631-HC-DEL-CX.

The AR submitted that if duty payable in a month is not debited in the CENVAT account then it will be treated as delayed payment and interest liability is attracted and that there is no time limit for demanding interest u/s 75 of FA, 1994.

The Bench observed -

++ Settled proposition of law is that even in clandestine evasion cases also, the CENVAT credit of inputs/ input services admissible, during the period of offence, is allowed to be abated from the total duty demanded even at the appeal stage. The interest payable is only calculated on the duty liability finally determined and not with respect to the duty demanded in the show cause notice.

++ In this case, appellant stands on a better footing as the CENVAT credit was available in the CENVAT account but could not be debited. It has to be thus held that interest is not payable with respect to duty required to be debited in the CENVAT Credit Account provided sufficient balance was available in the CENVAT Credit Account. Nothing has been brought on record that such a credit was not available in the CENVAT Account during the relevant period for debit. Appeal of the appellant is thus required to be allowed on merits.

In the matter of plea of time bar, the Bench observed that the view expressed by the adjudicating authority is not correct in view of the judicial pronouncements cited. Nonetheless, noting that the aspect of time bar is of academic nature as on merits the issue had been held to be in favour of the appellant, the appeal was allowed.

(See 2015-TIOL-402-CESTAT-AHM)