Rate of interest: Effective from 01-04-2011, the rate of interest has been enhanced from 13% to 18% p.a.. This 18% interest is to be further reduced by 3% for assessees with a turnover of upto Rs.60 lakh for the last preceding financial year or for any of the years covered by the notice. As a background, Section 75 as amended by the Finance Act, 2004, w.e.f. 10-09-2004 provides a range, from 10% to 36% p.a. within which, the Government may notify the applicable rate of interest. Accordingly, Notification No. 26/2004-ST, dated 10-09-20047 had been issued which notified 13% p.a. as the rate of interest to be charged for the period by which the deposit of tax or any part thereof has been delayed. Notification No.14/2011-ST, dated 01-03- 2011, effective from 01-04-2011, has now amended Notification No. 26/2004-ST, by enhancing the rate of interest from 13% to 18% p.a. Rate of interest for the prior periods: Initially, w.e.f. 01-07-1994, Section 75 prescribed the rate of interest as 1.5% for every month or part of the month by which the deposit of service tax was delayed. For computing the period of delay in payment of service tax, the month was to be counted from the next day from the date on which the payment of service tax was due. For example, if service tax was payable by 25th of a month, one month period for computation of interest was to be counted from 26th of that month to 25th of the next month. This position had been clarified by Trade Notice No. 50/CE/98-ST, dated27-11-1998 issued by the Chandigarh Commissionerate-I. Prescribing rate of interest on monthly basis proved unfavourable to the assessee inasmuch as the assessee was required to pay interest for two months even if there was a delay of few days i.e. less than a month. This was so because delayed period of even few days used to spread over two months and therefore, the assessee was made to pay interest for two months. To sort out this contentious issue, the Finance Act, 2001, w.e.f. 16-07-2001 amended Section 75 and provided for rate of interest as 24% p.a. to be charged for the period by which the deposit of service tax was delayed. Later, the Finance Act, 2002, w.e.f. 16-08-2002, reduced the rate of interest from 24% to 15% per annum which remained effective till 09-09-2004. Since 10-09-2004, present rate of interest is applicable as discussed in the above para. However, all these rates have been prescribed on per annum basis. Prescribing rate of interest on “per annum” basis implied that interest was to be paid for the actual number of days for which the payment was delayed. However, even with respect of the erstwhile provision prescribing rate of interest of 1.5% per month or part of the month, in BPL Mobile Cellular Ltd. v. CCE8, it was held that where the delay was for part of the month only, interest could be charged for the period of delay alone and not for the full month. For demand of service tax and interest, the Show-Cause Notice (SCN) must be issued under Section 73: In Diamond Cables Ltd. v. CCE, 9 the impugned order directing the payment of service tax together with interest was set aside because the SCN was issued in terms of Sections 76 and 77 for payment of interest and for imposition of penalty. The Tribunal relied upon its earlier order in the case of Markfed Oil & Allied Industries v. CCE, 10 wherein demand of service tax with interest was set aside on the ground that notice was not issued under Section 73 of the Finance Act, 1994 but under Section 77 for imposition of penalty on account of failure to file returns. No Interest on Service Tax during stay period: In Suri & Co v. CCE11, it was held that during the period of stay, there was no effective provision of law authorising levy of service tax, let alone levy of interest thereon, the demand of interest for the said period is unauthorised. Interest cannot be demanded on the tax paid when there was no liability: In Tebma Shipyards Ltd v. CCE12, it was held that where there was no tax liability for the assessee, there was no liability for them to pay interest on tax either. No liability of interest where cheque presented on due date but amount transferred to the Government treasury after the due date: In Commissioner v. National Publicity13, it was held that that since the cheque was not