Interest on Service Tax

Dear Hardik Ji,

Whether you have the Challan or Proof of the Payment made with in due date means submission of the Cheques DD with in due to the Bankers treated as paid in time.

It is observed that the identical issue had arisen in case of payment of Inland Air Travel Tax (IATT) by Sahara Airlines Ltd. The concerned authorities had imposed penalty and ordered recovery of the interest from the party since the cheques deposited by them towards payment of IATT were credited to the Government after the due date. The matter has now, been decided in second appeal by the Government of India{Sahara Airlines Ltd. Vs. Commissioner of Customs (Appeals)- (2000) 110 TAXMAN 378 (GOI)}.

The Government has held that a harmonious reading of the provisions of Rule 7 of the Central Government Account (Receipts and Payment) Rules and Rules 79 & 80 of the Treasury Rules, makes it clear that the Government dues can be presented in the form of cheque into the authorized Bank. And if the cheque is not dishonoured later, the payment shall be deemed to have been made on the date when the cheque was handed over to the Government's bankers. Accordingly, the Government set aside the imposition of penalty/interest etc. in the said case.

The ratio of above-cited decision of the Government would applymutatis mutandisto the payment of service tax also. Therefore,it is clarified that in the cases where the service tax amount has been deposited by an assessee in the authorized Bank, by cheque, before the due date and such cheque is not dishonoured later, the Department need not initiate proceedings for recovery of interest /penalty etc. However, if the cheque is not honored in due course or the clearance is abnormally delayed for any lapse on the part of the assessees, the Department would be free to take penal action etc. as deemed fit.

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