Interest Liability Payable for Normal Period alone can be Adjusted: CESTAT orders Payment of Demand of Interest u/s 75 of Finance Act [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ordered payment of demand of interest under Section 75 of Finance Act, 1994 and ruled that interest liability payable for normal period alone can be adjusted.

A common Show Cause Notice was issued alleging, on the ground that M/s. Joy Alukkas was paying rent to Shanthi Thiagarajan, Preethi Thiagarajan, M/s. Real Value Promoters (P) Ltd. and fifteen other co-owners and that a portion of the property was rented out to M/s. Bank of India, but however, Service Tax relating to this rental was partially remitted only on 23.01.2012.

Hence, it was alleged that the appellants had contravened Sections 68, 69 and 70 of the Finance Act, 1994 read with Rules 4, 6 and 7 of the Service Tax Rules, consequent to which it was proposed to recover Service Tax along with Education Cess and Higher Education Cess, apart from interest under Section 75 and penalty under Sections 76, 77 and 78 of the Finance Act, 1994.

The counsel for the appellant submitted that since the Service Tax demand has been completely met by the appellants, even though Service Tax on renting of immovable property. It was also stated that substantial amount had already been remitted towards the proposed demand in the Show Cause Notice.

It was also pleaded that during the relevant period, under the category of ‘Rental of Immovable Property’, Service tax was to be paid on the taxable value which is determined after deducting the property tax paid for the period in question, which was in terms of Notification No. 24/2007-ST dated 22.05.2007.

A Two-Member Bench comprising M Ajit Kumar, Technical Member and P Dinehsa, Judicial Member observed that “With regard to the levy of interest, we note that the same is mandatory in nature, but however, the same has not been quantified by the adjudicating authority. In view of the facts and circumstances of the case, we hold that any interest liability payable for the normal period alone could be demanded / adjusted.”

“The demand of interest under Section 75 of the Finance Act, 1994 is held to be payable for the normal period alone” the Bench noted.

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