Accountant’s Clerical Error in ST-3 Returns: CESTAT Holds Only Two Instances of Delay Valid, Grants Partial Relief on Interest Demand [Read Order]
CESTAT holds accountant’s clerical error in ST-3 returns led to wrong interest demand, grants partial relief to AKC & SIG
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that only two instances of delay in service tax payment were valid and that most of the interest demand confirmed by the department was unsustainable as it arose from a clerical error in the ST-3 returns filed by the assessee’s accountant.
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AKC & SIG, a joint venture firm engaged in site formation, excavation, and demolition services, was subjected to audit for the financial year 2015-16. The audit revealed late filing of ST-3 returns without payment of the statutory late fee of Rs. 32,400 and an alleged delay in service tax payment resulting in an interest liability of Rs. 2,57,814.
The adjudicating authority confirmed both demands, and the Commissioner (Appeals) upheld the order. Aggrieved, the assessee appealed to the Tribunal.
The appellant’s counsel argued that while the late fee was not disputed, the interest demand was largely incorrect. They submitted that except for two instances, all service tax payments were made on time. The counsel pointed out that the accountant made a typographical mistake by recording the quarter as October to December instead of January to March in the ST-3 returns.
The invoices, which were placed on record, showed that payments were made in accordance with the correct quarter. They argued that the department wrongly treated these entries as delayed payments and relied on case law to argue that interest cannot be levied where there is no actual delay.
The revenue counsel argued that the only basis for verification was the ST-3 returns, which clearly showed late payments for certain quarters. They explained that under Section 75 of the Finance Act, 1994, interest is mandatory whenever there is delay in payment of tax, regardless of the number of days. They pointed out that the tribunal could not disregard the official returns to accept the assessee’s claim.
The single-member bench of Dr. Rachna Gupta observed that Section 75 uses the word “shall,” which makes payment of interest compulsory if tax is not paid on time. The tribunal observed that there was indeed a six-day delay in January 2015 and a two-day delay in January 2016, which justified interest for those invoices.
The tribunal also observed that the other entries were wrongly recorded due to a typographical error, as the invoices and payment dates related to a later quarter and matched timely payments.
The tribunal explained that interest confirmed on the basis of those mistaken entries could not be sustained. It upheld the demand of late fee of Rs. 32,400 and interest only for the two admitted instances of delay, but set aside the remaining interest demand. The appeal was partly allowed.
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