Interest defination and condition

Interest is required to be paid if the payment is not done in time or as requried.  for instance if you do not file the I-T return on or before the due date of filing the return of income, then you would be reqrueid to pay interest for late filing of return.  This interest is calculated at specified percentage on the tax liability arising for the year.  Similarly if an assessee is reqruied to file his Service Tax Return before the due date & he fails to file the same before teh due date then again he would be liable to pay interest for late filing of ST Return.

So interest is in short a charge required to paid paid if there is any default on part of the assessee as explained above.

In your example you are not liable to pay if you pay your excise duty in cash instead of utilizing the Cenvat Credit as long as you adhere to the timelines.

DEAR SIR,

I HAVE PAID SERVICE TAX ON ROYALTY BY CENVAT CREDIT BUT SERVICE TAX DEPARTMENT RAISE A DEMAND THAT UNDER REVERSE CHARGE MACHENISM YOU SHOULD  PAY SERVICE TAX ALONG WITH INTEREST FROM 2007. I AM READY TO PAY SERVICE TAX IN CASH AND WILL TAKE CREDIT AFTER THAT BUT INTEREST IS VERY HIGH. CAN YOU TELL ME ANY LEGAL ADVICE SO THAT I CAN SAVE MY INTEREST AMOUNT.

THANKS