CESTAT: Late Payment Charges in the Nature of Interest Not Taxable as Declared Service

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Last updated: 11 September 2026
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The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that late payment charges, even if labelled as interest, are not subject to service tax. The Tribunal affirmed that for a charge to be considered a taxable declared service, there must be 'consideration' for a service provided. Payments made as damages due to a breach or delay, rather than for a specific service, lack this essential element of consideration. Therefore, such charges cannot be taxed as declared services.

Court :
Ahmedabad

Brief :
The CESTAT, Ahmedabad, in Inox Air Products Pvt. Ltd. v. Commissioner of CGST & Central Excise, Surat, pronounced on 8 September 2026, examined whether late payment charges received by the assessee on supplies of industrial gases constituted a “declared service” under Section 66E of the Finance Act, 1994.

Citation :
Service Tax Appeal No. 10768 of 2020-DB

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