Whether the excess of Service Tax paid be adjusted with Future Payments?

PJ/Case Law/2014-15/2335

Case:- B4U TELEVISION NETWORK (I) P. LTD. Versus COMMR. OF SERVICE TAX, MUMBAI

Citation:- 2014 (35) S.T.R. 88 (Tri. - Mumbai)

Brief fact:- The brief facts of the case are that the appellant paid Service Tax during the period 2001 and 2002 to the tune of 14,62,774/- of their own. However, they were required to pay Service Tax for the said period of only 4,76,933/-. In the result, they paid excess Service Tax of 9,85,841/-. The excess paid Service Tax has been adjusted by the appellant for the payments of Service Tax of service provided during the period October, 2002 to March, 2003. The Revenue is of the view that the excess Service Tax paid by the appellant for the earlier period can-not be adjusted for the future payments, therefore, letter dated 9-3-2004 was is-sued to them after scrutinizing the Service Tax returns wherein a query was raised that for the period ending March, 2003 they have short paid the Service Tax, therefore they are required to pay Service Tax short paid and the adjustment of past payments is not permissible.

The said letter was replied by the appellant that they are entitled to adjust the said payment under Rule 6(3) of the Service Tax Rules, 1994. Thereafter a show cause notice was issued demanding the Service Tax short paid by them and accordingly, the impugned order has been passed. Aggrieved from the same, the appellant is before me.

Appellant’s contention:- It is the contention of the appellant that it is not in dispute that they have paid excess Service Tax during the period 2001 to 2002 and the said amount has been adjusted by the appellant for the demands of Service Tax payable in the period October, 2002 to March, 2003 and the same has been intimated to the de-partment. As appellant has not collected any Service Tax from the clients for providing the service from 2001 to 2002, therefore they have complied with the provisions of Rule 6(3) of the Service Tax Rules, 1994. Therefore, they are entitled to adjust the excess payment of Service Tax against the future Service Tax liability. To support this contention, they relied on the following decisions :

(1) Sentinel Security (P) Ltd. pool (134) E.L.T. 806 (T) = 2006
(2) S.T.R. 520 MI (2) Narnolia Securities P. Ltd. 12008 (10) S.T.R. 619 (T) I
(3) Nirma Architects & Valuers 12006 (1) S.T.R. 305 MI.

Respondent’s contention:-On the other hand, Id. AR strongly opposed the contention of the Id. counsel and submits that the case of the appellant is not covered by Rule 6(3) of the Service Tax Rules, 1944. If they have paid excess Service Tax in the earlier period, they could have filed the refund claim for the excess payments and both the lower authorities have rightly demanded from them the short payment of Service Tax in the impugned order.

Reasoning of judgment:-In this case, the assessment took place for the period 2001 - 2002 and it was held by the Adjudicating Authority that the appellant has paid excess amount of Service Tax of 9,85,841/- on 11-5-2003. The appellant has adjusted the said amount of excess payment of Service Tax for the period October, 2002 to March, 2003 for the Service Tax liability. The appellant has not collected the ex-cess Service Tax from their clients for the period 2001 to 2002. These facts are not in dispute. In the light of these facts, The Honourable Judge had examined the provisions of Rule 6(3) of the Service Tax Rules, 1994 are applicable to the facts of the case or not. The provisions of Rule 6(3) of the Service Tax Rules, 1994 are reproduced hereunder :-

"(3) 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 any reason, the assessee may adjust the excess Service Tax so paid by him (calculated on a 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."

A plain reading of the said provisions shows that if the assessee has paid Service Tax during the particular period for which they have not provided the service to the client and the said Service Tax paid to the department has been either refunded to the client or not collected, in that situation, the excess payment of Service Tax can be adjusted for future payments.

With these observations, the contention of the Id. AR that if they have paid excess Service Tax for the earlier period, they have to file refund claim is not acceptable in the light of the judgment in the case of Nirma Architects & Valuers (supra), wherein this Tribunal held that if adjustment of excess Service Tax is not allowed for future payments, the provisions of Rule 6(3) ibid shall become otiose and non-implementable. As the fact that excess payment is not in dispute and same has been adjusted for the future liability of Service Tax by the appellant, therefore, to pay Service Tax is only an exercise which created hurdle in the smooth functioning of imposition and collection, as held by the Tribunal. Therefore, the adjustment can be allowed.

In these circumstances, The Honourable Judge allowed the adjustment of excess Service Tax paid by the appellant during the period 2001 to 2002 for the Service Tax liability to October, 2002 to March, 2003. In the light of these observations, the matter is remanded back to the Adjudicating Authority to make the adjustment of the demand for the period October, 2002 to March, 2003 with the excess payments for the period 2001.02 and pass appropriate order of assessment in accordance with law.

Decision:- Appeal allowed

Comment:-

Thecrux of the case is that the assessee has paid Service Tax during the particular period for which they have not provided the service to the client and the said Service Tax paid to the department has been either refunded to the client or not collected. In that situation, the excess payment of Service Tax can be adjusted for future payments.

Prepared by :-Meet Jain

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PJ/Case Law/2014-15/2335

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