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If the assessee has a bona fide belief and service tax liability is paid voluntarily for the period beyond normal period of limitation, liability of interest does not arise.
Facts
The appellant paid service tax under protest along with interest for a disputed matter during the pendency of the proceedings. At the adjudication stage, the matter was contested on merits as well as on limitation. The adjudicating authority confirmed service tax demand with interest but dropped penalties. The service tax liability was not contested further in view of the clarification on the subject matter. However, interest liability was contested for extended period as they had no intention to evade service tax. Department argued that irrespective of the intention to evade service tax or otherwise, interest liability arises.
Held
In view of the clarification, the appellant’s appeal failed on merits. With respect to the liability of interest, the Gujarat High Court in the case of Gujarat Narmada Fertilizers Co. Ltd. 2012 (285) ELT 336 (Guj.), had observed that if the period of limitation had expired and if the assessee has paid service tax voluntarily, SCN was not valid. Further, having regard to the intention of legislature it was held that in any case, it was not open for department to recover interest. The above decision was held to be squarely applicable in the present case since the appellant had a bona fide belief which was undisputed by the department. Accordingly, demand of interest was set aside.
