2026-VIL-471-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Limitation Period for demanding Interest on delayed payment of Service Tax - The appellant is engaged in providing Cleaning and Manpower Services and due to slow down in the industry and delayed receipt of payments from clients, they discharged the service tax liability belatedly. The department issued a show cause-cum-demand notice demanding interest under Section 75 of the Finance Act, 1994 for the periods 2014-15 till 30.6.2017 - Whether the normal period of limitation prescribed under Section 73 applies for demanding interest under Section 75 as well, even though Section 75 does not prescribe any specific limitation period - HELD - It is a well-settled principle that when a statute provides a power without specifying a particular time limit, the authority must exercise that power within a reasonable period. Interest under Section 75 is incidental to the principal tax liability under Section 73, and therefore, the limitation framework governing the principal demand must logically extend to the demand of interest unless the statute expressly provides otherwise. The Supreme Court and High Courts have held that the period of limitation that applies to a claim for the principal amount should also apply to the claim for interest thereon. In the absence of any specific allegations warranting invocation of the extended period of limitation under Section 73, the demand including interest can be sustained only within the normal period of limitation. Since the show-cause notice was issued beyond the normal period of limitation, it is barred by limitation and the same is set aside - The appeal filed by the appellant is allowed
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