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Under Explanation to section 67, in case of associated concerns, when assessee paid service tax on book adjustment made prior to 10.05.2008, interest cannot be demanded for period prior to 10.05.2008.
Facts
For services received from overseas associated concern in FY 2006-07 and 2007-08, the assessee made book entries for consideration payable. Consideration for such services was paid in January 2011. An explanation was inserted u/s. 67 w.e.f. 10.05.2008, that in case of associated enterprise, the gross value charged shall include book entries made in the books of accounts of person liable to pay tax. Therefore service tax was discharged based on book entries, under reverse charge in January 2009 along with applicable interest. However, while quantifying interest, only period after 10.05.2008 was considered. However, department contended that interest is required to be paid prior to 10.05.2008 commencing from the date of book entries.
Held
The Hon’ble Tribunal noted that the Appellant did not contest interest paid for the period after 10.05.2008 but, only interest attributable for the period commencing from due date pertaining to the date of book entries up-to 10.05.2008, when explanation was inserted. It was noted that even in the Order-in- Original, the levy of interest is held to have commenced only after 10.05.2008. Relying upon decision of CESTAT in Sify Technologies Ltd. vs. CCE & ST [ Appeal No.ST/279/2010 dated 08-11-2010] on similar issue, the Hon’ble Tribunal observed that legislative intention of such amendment by way adding explanation was to introduce new provision and not to remove any doubts in existing provision. Decision of Larger Bench of the Tribunal in case of Commissioner of Customs vs. Skycell Communications Ltd. [2008 (232) ELT 434] was also relied upon which clarified that Explanation placing restrictions prejudicial to the assessee will not be retrospective. Consequently, the Tribunal held that there is no liability to pay interest on the book adjustments made prior to 10.5.2008.
