Whether appellant is liable to pay demand of service tax along with interest and penalty?

PJ/Case Law /2016-17/3260

Case:- L & T SARGENT & LUNDY LIMITED VersusCOMMR. OF C. EX. & S.T., VADODARA

Citation:-2016 (43) S.T.R. 249 (Tri. - Ahmd.)

Brief Facts:-The appellants herein M/s. L&T Sargent & Lundy Limited had made excess payment of service tax of Rs. 2,49,858/- in May, 2010 and subsequently adjusted the said excess amount paid towards payment of service tax during the months of June, July and August, 2010. However, the appellants had not intimated the said adjustment to the department and have suo motu adjusted the same. Revenue was of the opinion that they are not eligible to do so in terms of Rules 6(4A) and 6(4B) of the Service Tax Rules, 1994 and confirmed the demand of service tax, along with interest. Penalties of Rs. 10,000/- under Section 77, and equivalent penalty of Rs. 2,49,858/- under Section 78 of the Finance Act, 1994 were also imposed on the appellants. The Commissioner (Appeals) upheld the demand and equivalent penalty under Section 78, and reduced the penalty of Rs. 10,000/- under Section 77 to Rs. 5,000/-.
Appelants Contention:- Shri R. Vishwanathan, Senior Adviser to the appellants appears and submits that there was no intention to evade payment of service tax and they have not adjusted any ineligible amount. It is not in dispute that they have paid the excess service tax amount of Rs. 2,49,858/- and the same is eligible to be adjusted towards the future service tax liabilities. It is his contention that though they had to intimate the department for such adjustments under the provisions of Rule 6(4A) and 6(4B), there was no such requirement under Rule 6(3) of the Service Tax Rules, 1994. He further submits that the limit of adjusting amount up to Rs. one lakh in the succeeding month was also applicable to adjustments under Rule 6(4A) only and there were no such restrictions under Rule 6(3). He therefore submits that the issue is only of minor procedural defect, if any, and does not warrant imposition of equivalent penalty under Section 78 of the Finance Act, 1994.

Respondent Contention:- On the other hand, learned Authorised Representative submits that the appellants are an established Company belonging to a big industrial group and that they are aware of the provisions, rules and procedures. Therefore, such a unit ought to follow the procedures as laid down and violation of the same should be viewed seriously. He argues that therefore, the imposition of penalty under Section 78 is warranted.
Reasoning of Judgment:- On careful consideration of the arguments of both sides and perusal of the records, it is found that there is no dispute about the fact that appellants have paid excess service tax amount of Rs. 2,49,858/- in May, 2010. The dispute revolves around the procedure they have followed in adjusting the said excess amount against the future service tax liabilities in June, July and August, 2010 suo motu. The arguments of the learned Senior Adviser of the appellants that infringement of the procedure is not serious enough to impose equivalent penalty of Rs. 2,49,858/- under Section 78 in the instant case are strong. It is so especially, since in reality there is no short payment of service tax of Rs. 2,49,858/- in the instant case, and it is a question about adjustment of excess service tax paid which has been adjusted suo motu against the subsequent service tax liability.
Thus, under the facts and circumstances of the instant case, the demand of Service Tax of Rs. 2,49,858/- and interest thereupon cannot be sustained, and the excess amount of Service Tax of Rs. 2,49,858/- paid earlier in May, 2010 should be regularised against the Service Tax liability of Rs. 2,49,858/- during the months of June, July and August, 2010.

Decision:-The appeal is allowed.

Comment:-The crux of the case is that the appellant has suo moto made adjustment of excess paid Service Tax towards Service Tax liability of subsequent months. There being no short payment, the said adjustment is regularized and the demand of Service Tax of Rs. 2,49,858/- and interest thereupon cannot be sustained. Also, the penalty of Rs. 2,49,858/- imposed under Section 78 is liable to be set aside.

Prepared by:- Ritika Mehta

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PJ/Case Law /2016-17/3260

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