Service tax interest payable by firm

Interest to be computed till date of payment of ST

1. This is really an interesting question. Plain reading of the provisions would suggest that interest is payable from the due date of payment of tax till the date of actual payment of tax. So, this means that the interest shall be payable for the period till the date of actual payment of Service tax.
2. But if this concept is applied, then when someone deliberately delays payment of interest alone, this would directly impact the revenue of the govt. Since interest portion is only a nominal part, is this going to be justified?
3. Is there any penalty for delayed payment of interest?
4. Views of others awaited

This is an interesting question. In case of income tax any payments made are first appropriated towards interest and later towards taxes. But in case of service tax no such sequence of appropriation is in place. Therefore, if tax is paid in full (i.e. principal) then interest calculation stops. Interest needs to be calculated only upto the date of payment of tax and not upto the date of payment of interest. Refer section 75 of the finance act 1994 for details.

Regards,

Ravi Kumar Somani