The Hyderabad bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the rejection of the refund claim, affirming that the taxpayer is liable to pay interest on service tax that was paid in a delayed manner.
The appellants were engaged in the provision of Taxable Services: ‘’Management or Business Consultancy Services”, ” Commission Coaching or Training Services “, and “Scientific and Technical Consultancy Services” and are registered with the department. On conduct of an audit of the records of the appellant, it appeared to the department that the appellants have incurred expenditure towards the Import of Services such as “CMMI Course Development Fee/CMMI Certified Lead appraiser per appraisal fee/CMI Institute per appraisal fee etc from CMMI Institute, USA for the services received from them.
However, due Service Tax was not discharged on Reverse Charge Mechanism. On being pointed out the appellants have paid Service Tax of Rs.2, 72,700/- on 24/09/2019. A show cause-notice dt. 03/02/2020 was issued to the appellants demanding Service Tax of Rs. 2, 72,700/- for the period 2016-17 to 2017-18; seeking to appropriate the Service Tax already paid; proposing to levy interest of Rs.1, 08,125/- and imposing penalty, Deputy Commissioner, vide order dt.05/02/2021, confirmed the proposals in the show cause-notice while imposing penalty of Rs.2, 72,700/- on the appellant.
Mr. Sujeet Kumar Borundia, Chartered Accountant, representing the appellant submitted that the order rejecting the refund claim was incorrect and was delayed over one year and therefore, making them ineligible to claim the transitional credit, for which the window was opened in October 2022 under GST; the ST-3 Returns for June Quarter 2017 was filed on 14th August 2017 while the due date was 15th August 2017; the appellant waited till the fag end for filing the Returns for any notification from CBIC; further, the appellant was handicapped to file the revised Returns on the day of the notification as 45 days were already over; they have filed revised Returns on 20th September 2017.
The bench found that the appellants are now claiming that interest was not payable as the notification was issued late. The appellants also claim that as the issue is revenue neutral, interest was not payable as held in the cases relied upon by them. On the other hand, the authorised representative for the revenue argued that unless all the provisions of existing law, including that of Section 11B, refund cannot be entertained. Further surprised to note that both sides have taken arguments which are tangential to the issue as far as the payment of interest was concerned.
Further found that Courts and Tribunal have been consistently holding that, under Excise, Service Tax provisions, payment of interest was a corollary to the payment of tax and the liability is automatic. The appellants having paid service Tax and having not disputed the payment of the same, whether or not under the said Amnesty Scheme, cannot seek exemption from payment of interest. To this extent, further considered the opinion that the stand of the appellants was not acceptable. It was held that appellants were liable to pay interest on Service Tax paid in a delayed manner.
Therefore, the single member bench of the tribunal comprising P. Anjani Kumar ( Technical member) found that the admissibility of credit in such situation is subject to provision of Rule 9(1) (bb) and therefore, no argument at length, on the issue of provisions of Section 142(7) of CGST Act, 2017, are applicable to the appellant.CESTAT found that authorized representative for the revenue has placed a number of judgments passed by this very Bench holding that the appellants were not eligible for refund of such credit.
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