2026-VIL-961-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax - Mandatory nature of interest under Section 75 of the Finance Act, 1994, Interest liability on delayed payment of service tax by Government Department - The postal Department collected service tax on postal and courier services provided by it during the period from April 2014 to June 2017 but failed to deposit the collected service tax by the due date - Whether a government department can be exempted from paying interest on delayed deposit of service tax collected by it on the ground that the delay was caused by bureaucratic procedures and lack of intention to evade tax – HELD – The appellant remains liable to pay interest on the delayed deposit of service tax notwithstanding its status as a government entity or the absence of fraudulent intention - The Section 75 of the Finance Act, 1994 mandatorily requires payment of simple interest at the prescribed rate for the period by which crediting of tax is delayed. Interest is compensatory in character, imposed on an assessee who has withheld payment of tax as and when it is due and payable, and differs fundamentally from penalty which is penal in character - While the delay may have resulted from bureaucratic procedures and lack of malicious intent, these circumstances cannot serve as grounds for setting aside the statutory demand for interest. The mandatory nature of the interest provision under the statute cannot be circumvented by the status of the assessee as a government department or by explanations regarding administrative difficulties in depositing taxes through prescribed modes. The fiscal statutes must be applied strictly according to their statutory language without exception based on extenuating circumstances - The demand for interest on the delayed deposit of service tax is upheld and the appeal is dismissed
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