Adjustment of excess service tax paid with respect to advance for services to be provided that could not be provided subsequently.

PJ/Case law/2013-14/1896

Case:-AAKASH THE PLACE TO CELEBRATE VERSUS COMMR. OF S.T., AHMEDABAD

Citation:- 2013(31) S.T.R. 251 (Tri.-Ahmd.)

Brief Facts:-These two appeals are disposed by a common order as the issue involved in these cases is same.

The relevant facts that arise for consideration are that the appellants herein are engaged in providing taxable service under the category of Mandap Keeper services to their_, various customers. The appellant have collected some advance payment along with Service Tax from the customers and deposited such Service Tax collected to the Government account. Subsequently, the party plot was sealed by an order of Ahmedabad Municipal Corporation, due to which the party plot could not be given for the intended purposes. The appellant cancelled the bookings for the party plots and at the request of customers, refunded the booking amount along with the Service Tax collected by them. The appellants filed a refund claim before the lower authorities. The adjudicating authority allowed the refund of part amount and rejected the part amount in both these appeals as being time barred as per the provisions of Section 11B.

Aggrieved by such an order, the appellants preferred an appeal before first appellate authority. The first appellate authority vide the impugned orders, did not agree with the contentions raised by the appellants and rejected the appeals. Hence, these appeals.

Appellant Contentions:-Appellants would submit that both the lower authorities have mis-directed themselves inasmuch as they have not considered the provisions of Rule 6(3) of Service Tax Rules, 1994 in its correct perspective. It is his submission that the provisions of Rule 6(3) would apply in this case and the appellant is eligible to avail the credit of such Service Tax paid by the appellant as he has refunded the amount to the service recipient along with Service Tax. It is his submission that it is not in dispute the appellant has refunded the entire amount of Service Tax as well as the advance received from his customers. He would submit that both the lower authorities have considered the provisions of Section 11B but have overruled the provisions of Rule 6(3) of Service Tax Rules, 1994.

Respondent Contentions:-Ld. DR, on the other hand, would submit that the amount has been collected as Service Tax and paid to the Government of India. It is his submission that the Division Bench of the Tribunal in the case of Gujarat Road Transport Corporation vide Final Order No. A/1574-1575/WZB/AHD/2012, dated 29-10-2012, has held that once the provisions of Section 11B are invoked, the relevant date needs to be arrived at and the refund filed by the appellant in these cases would be hit by limitation as it is beyond the period of one year.

Reasoning of Judgment:-We have considered the submissions made from both sides and perused the records, we find that the undisputed fact in this case is that the appellant has collected some advance amounts for the party plots which were given by them to their service recipients for functions. It is also undisputed that the appellant has deposited the Service Tax collected to Government of India. The party plots were sealed by Ahmedabad Municipal Corporation on 17-7-2010. The appellants could not keep up contractual obligation made by them with the recipient of services and hence they refunded the amount along with Service Tax collected from their clients. The appellant had filed a refund claim on 8-6-2011, while they were registered with the Government of India no 31-3-2010.

It was found that the issue involved in this case will be covered by the provisions of Rule 6(3) of Service Tax Rules, 1994 instead of Section 11B. The provision of Rule 6(3) of Service Tax Rules, 1994 are reproduced hereunder:-

Rule 6(3):Where an assesseee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract, the assessee may take the credit of such excess Service Tax paid by him, if the assessee-

(a) Has refunded the payment or part thereof, so received for the service provided to the person from whom it was received or has refunded the payment or part thereof, so received along with the Service Tax payable thereon for the service provided by him to the person from whom it was received, or

(b) Has issued a credit note for the value of the service not so provided to the person to whom such an invoice has been issued.

Where an assessee has paid to the credit of Central Government Service Tax in respect of a taxable service, which is not so provided by him either wholly or partially for the any reason, the assessee may adjust the excess Service Tax so paid by him, calculated on pro rata basis, against his Service Tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the Service Tax thereon to the person from whom it was received.”

It can be seen from the above reproduced provisions, an assesseee may take credit of Service Tax paid by him, if he has not provided any service and has refunded the amount to the service recipient along with Service tax paid by him. We find that as informed by ld. Consultant that the appellants have won the case in Hon’ble High Court of Gujarat and sealing of the party plots has been lifted by Hon’ble High Court and they are back in business. On a specific query from the Bench that the appellant will be able to utilize the credit of Service Tax paid. He answered in affirmative. If that be so, it was found that there is no time limit indicated in the provisions of Rule 6(3) of Service Tax Rules, 1994 for the appellant to utilize or take credit of excess tax paid by him. In the case in hand, there being no dispute as to the payment of excess Service Tax by the appellant and having refunded to his client, the appellant can avail the credit of such excess Service Tax paid by him for discharge of Service Tax liability which may arise subsequently having started his business as Mandap Keeper services. To that extent, it was found that both the lower authorities are in error in not sanctioning the refund to the appellant.

Accordingly, the impugned orders are set aside to the extent these are challenged before the High Court and the lower authorities are directed to give the credit of excess amount of Service Tax paid by the appellant that can be utilized to discharge the Service Tax liability arising out of the services rendered by him, after lifting of sealing of the party plots.

Decision:-Appeals are allowed.

Comment:-The crux of this case is that Rule 6(3) clearly provides that the assessee may adjust the excess Service Tax so paid by him, calculated on pro rata basis, against his Service Tax liability for the subsequent period, if assessee has refunded the value of taxable service and the Service Tax thereon to the person from whom it was received for providing services that could not be provided due to unforeseen circumstances. Hence, the assessee may avail cenvat credit of the excess service tax if the refund of the same could not be granted in terms of section 11B of the Central Excise Act, 1944.

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