Secure Hospitality & Insurance Service Pvt Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
The CESTAT Mumbai examined an appeal concerning the demand of interest under Section 75 of the Finance Act, 1994 for delayed payment of service tax. The appellant, engaged in providing cleaning and manpower services, had delayed payment of service tax on certain occasions due to slowdown in the industry and delayed receipt of payments from clients. However, it had regularly filed ST-3 returns, and there was no dispute regarding such filings.
During audit, the department noticed delayed payment of service tax and issued a show cause notice dated 24 June 2020, demanding interest amounting to ₹4,79,974 for the period 2014–15 to 30 June 2017. Although the appellant had admitted liability to pay interest and sought time, it had not discharged the same. The Commissioner (Appeals) upheld the demand, holding that no limitation period applied for recovery of interest under Section 75.
The primary issue before the Tribunal was whether the limitation period prescribed under Section 73 for recovery of service tax also applies to recovery of interest under Section 75, even though Section 75 does not specify any limitation period.
The Tribunal observed that Section 75 provides for interest on delayed payment but does not prescribe a time limit for issuing demand notices. It held that where a statute grants power without specifying a limitation period, such power must be exercised within a reasonable period. It further held that interest under Section 75 is not an independent levy but is incidental to the principal tax liability under Section 73. Therefore, the limitation applicable to the principal demand must also apply to interest unless expressly excluded.
