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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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PJ/Case Laws/2012-13/1118

Delay in payment of service tax – Interest being compensatory in nature is payable for delayed payment.

Case: Commissioner of C. Ex., Mangalore V/s Hemant N. Talekar
 
Citation: 2012 (26) S.T.R. 309 (Kar.)
 
Issue:- Delay in payment of service tax – Interest being compensatory in nature is payable for delayed payment.
 
Imposition of penalty for delayed payment of Service tax with interest before issuance of SCN – not tenable when service tax paid before SCN and sufficient cause existed for delay.
 
Brief Facts: - Respondent-assessee paid the service tax belatedly for the period from July 2000 to October 2003. The service tax was paid prior to issue of show cause notice. The Adjudicating Authority ordered recovery with interest and imposed penalties.
 
In appeal before the Tribunal, it was held that interest is not payable and penalty was waived [2007 (6) S.T.R. 378 (Tribunal)].
 
Hence, Revenue is in appeal before the High Court.
 
Reasoning of Judgement: - The High Court held that once there is a delay in payment of service tax, interest is payable as it is compensatory in nature as held by the Apex Court. Therefore, the finding that interest is not payable is erroneous and is set aside.
 
With regard to penalty, it was held that penalty is imposed for a period prior to the introduction of sub-section (3) of Section 73. Therefore, mere payment of tax and interest prior to the issue of show cause notice by itself is not a ground to wave the levy of penalty. However, Section 80 mandates, if the assessee shows sufficient cause for non-payment of tax and interest within time, direction is vested with the authority to consider the said cause and in its view, if it is sufficient cause, not to impose penalty. In the instant case admittedly the assessee has paid tax and also paid interest even before the issue of show cause notice and has shown cause why it could not be paid earlier.
 
The High Court held that in view of the facts of the case, the Court satisfied that it constitutes a sufficient cause. In this regard it is also useful to refer to the Circular dated 20-10-2010 prohibiting the revenue from preferring an appeal where the tax effect is less than Rs. 2 lakhs. Though the said circular makes it clear that it comes into effect in respect of appeals to be filed subsequent to the date of the circular i.e., 1-11-2010, the Apex Court in the case of Commissioner of Central Excise, Bangalore v. Mysore Electricals Industries Limited [2006 (204) E.L.T. 517 (S.C.), has held that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. Thus when the circular confers benefit on the respondents they have a right to claim the enforcement of the same prospectively. As this circular is in favour of the assessee, in view of the aforesaid judgment of the Apex Court, the circular had to be applied retrospectively granting the benefit. The interest component is hardly Rs. 24,000/-. In fact the interest was paid and thereafter refunded pursuant to the Tribunal's order.
 
In the facts of the case, the High Court was satisfied though they have set aside the order of the Tribunal, insofar as interest paid is concerned, they allow the matter to rest here, so that no liability can be enforced against the assessee in view of the aforesaid circumstances.
 
Decision: - Appeal partly allowed.

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