IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 27TH DAY OF NOVEMBER, 2019 BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT APPEAL No.3461 OF 2016(T – RES) AND WRIT APPEAL NOs.5104-26 OF 2016(T – RES) BETWEEN:
1. UNION OF INDIA MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI – 110 001 REPRESENTED BY ITS SECRETARY.
2. THE PRINCIPAL COMMISSIONER OF SERVICE TAX, SERVICE TAX COMMISSIONERATE, BMTC BUILDING, ABOVE BMTC BUS STAND, 4TH FLOOR, HAL AIRPORT ROAD, DOMMALURU , BENGALURU – 560 071.
... APPELLANTS (BY SRI JEEVAN J.NEERALGI, ADVOCATE) AND:
M/S SUBRAMANYA CONSTRUCTION AND DEVELOPMENT COMPANY, A COMPANY INCORPORATED UNDER THE COMPANIES ACT HAVING REGISTERED OFFICE AT NO. 42, 3RD CROSS, INDUSTRIAL SUBURB, 2ND STAGE, YESHWANTHPUR, BENGALURU – 560 022.
REPRESENTED BY ITS DIRECTOR, MR.K.N.BALASUBRAMANYAM ... RESPONDENT (RESPONDENT SERVED, UNREPRESENTED) THESE WRIT APPEALS ARE FILED UNDER SECTION 4 OF THE KARNTAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED 5.7.2016 PASSED BY THE LEARNED SINGLE JUDGE OF THIS HON’BLE COURT IN WRIT PETITION NO.32502 OF 2016 AND WRIT PETION NOs.32967 – 989 OF 2016 AND ETC.
THESE WRIT APPEALS COMING ON FOR HEARING, THIS DAY, RAVI MALIMATH J., DELIVERED THE FOLLOWING:
JUDGMENT Aggrieved by the order dated 5.7.2016, passed by the learned Single Judge in Writ Petition No.32502 of 2017 and Writ Petition Nos.32967-32989 of 2016 in reducing the rate of interest of service tax to 6% per annum, the appellant - Union of India has filed these appeals.
2. The Learned counsel appearing for the appellants submits that the liability to pay the service tax for the period from April 2014 to March 2016 is undisputed. Only because the writ petitioner pleaded some difficulty, the learned Single Judge reduced the rate of interest to 6% per annum. That the same runs contrary to the provisions of Section 75 of the Finance Act, 1994. In terms whereof, the rate of interest for the delayed payment of service tax ranges from 10% onwards to 36% p.a. i.e., the statutory demand and it cannot be reduced to a lesser amount.
3. The respondents are served and unrepresented.
4. On hearing the learned counsel for the appellants, we are of the view that appropriate interference is called for. The statutory demand cannot be diluted in the manner which it has been done. The liability to pay service tax at Rs.11.25 Crores is for the months from April 2014 to March 2016. However, without the approval of the Union of India to reduce the rate of interest to 6% p.a., that too when the law demands the rate of interest between 10% and 36% per annum, the learned Single Judge has exercised the power beyond jurisdiction. When the statute commands a rate of interest, the same is mandatory. It cannot be diluted. The rate of interest awarded is less than the statutory demand. Therefore, the rate of interest awarded by the learned Single Judge requires to be interfered with.
5. For the aforesaid reasons, the appeals are allowed.
The order dated 5.7.2016 passed by the learned Single Judge in Writ Petition No.32502 of 2017 and Writ Petition Nos.32967-32989 of 2016 is modified.
That portion of the order directing the payment of interest at 6% per annum is set aside.
Rest of the order is sustained.
The writ petitioner is liable to pay the statutory demand under Section 75 of the Finance Act.
Sd/- JUDGE Sd/- JUDGE Cs/-
CT:MJ