Adjustment of deposition of excess service tax in subsequent period.

PJ/CASE STUDY/2010-11/41

09 February 2011

PJ/Case Study/2010-11/41

CASE STUDY

Prepared By:
CA Pradeep Jain,
Sukhvinder Kaur, LLB [FYIC]

Introduction: -

If an assessee has deposited excess amount toward service tax liability for one period then can the assessee adjust the excess amount paid in the service tax liability to be adjusted for the next period. This is the issue involved in the case under study.

In the matter of M/s Raj and Associates, Jodhpur
[Order-In-Original no. 519/ST/2009-10 dated: 23.6.2010]

Brief facts of the case: -

-           On scrutiny of ST-3 Return of the Noticee filed for the half year ending March, 2005, the Department noticed that there was certain amount was payable as service tax liability. The Noticee had paid lesser amount through TR 6 challan and part was paid through Cenvat credit. After adjusting these amounts, there was still some shortfall. A note was put in the ST-3 saying that the rest of amount has been excess paid in ST-3 half year ending September, 03.

-           Department alleged that there was no provisions of adjustment in Service Tax Rules, 1994 and by thus act, the Noticee had paid short service tax and have thereby contravened the provisions of Section 66 & 68 of Finance Act, 1994 readwith Rule 6 of the Service Tax Rules, 1994.

-           Show cause notice was issued to the Noticee demanding short paid service tax with interest and also proposing to impose penalty under Section 76 of the Finance Act, 1994.

Noticee’s Contentions: -

Noticee replied to the Show Cause Notice on the following contentions:

The Noticee submitted that in ST-3 return for half year ending Sept, 03 they had paid excess service tax and had filed refund claim on 3.12.2003. But the refund claim has not been sanctioned.

The Noticee has given many reminders to the department but till date the refund claim has not been sanctioned.

So on 25.01.2005 they informed the department about adjustment of excess amount paid by them towards the service tax liability pertaining to the half year ending March, 2005.

Reasoning of the Judgment: -

The learned Adjudicating Authority held as under: -

On perusal of ST-3 Return for the half year ending Sept.03 and found that during the quarter ending Sept. 03 the noticee had excess paid the service tax vide TR-6 hallan dated 24.10.2003. Thus, there is no doubt from the perusal of return, records, calculation of service tax as well as from TR-6 Challan that the Noticee had paid excess service tax.

The Adjudicating Authority also noted that the Noticee had filed refund claim on 3.1.2003 for refund of excess amount deposited as service tax.

It was also noted that the noticee has reminded the matter to the department and asked them to refund of the service tax. The receipt copy of reminders has been produced by the noticee which clearly shows that the aforesaid letters have been received in the department. But no action has been taken by the department to refund the same.

It was noted that the Noticee had informed the department and adjusted this excess deposit against the service tax liability for the half year ending March, 2005. The Noticee also gave an undertaking that they have not received this refund claim from the department.

It was also confirmed from the Superintendent (Refunds) and found that neither the claim has been passed nor pending with the department. Moreover after giving due intimation the Noticee had adjusted the excess deposit.

Decision of the Deputy Commissioner: -

The proceedings initiated by the Show Cause Notice were dropped.

Conclusion: -

The learned Adjudicating Authority rightfully decided the matter in favour of the assessee. The assessee has deposited excess Service tax. They have filed refund claim for the same but department has not sanctioned the said refund claim. Only thereafter the assessee has adjusted this excess deposit against the service tax liability for the half year ending March, 005.

It has been seen that the department does not sanctioned refund claim of Service tax and when assessee adjusted the excess amount. They simply issued the show cause notice then the demand is dropped later on. If the refund claim sanctioned on time then the valuable time and value of department and service providers are not wasted.

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PJ/CASE STUDY/2010-11/41
09 February 2011

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