Deposition of service tax under wrong head

PJ/CASE STUDY/2010-11/12

16 July 2010

PJ/Case Study/2010-11/12

Case Study

Prepared By:

CA Pradeep Jain

Parag Ghate, B.Com and

Sukhvinder Kaur, LLB [FYIC]

Introduction:

In the case under study, the assessee had deposited the service tax which he was liable to pay but under a wrong head. Therefore, can the amount of service tax should be recovered from him alongwith interest and penalty should be imposed on him is the issue involved in this case.

Relevant Legal Provisions:

Board Circular No. 58/07/2003-CX(ST), dated 20/05/2003

Using of wrong Accounting Code for payment of Service Tax clarification

I am directed to say that a representation had been received by the Board raising apprehensions regarding using a wrong Accounting Code for payment of Service Tax. Whether this amounts to having paid the Service Tax or not.

2. The Board has examined the issue. In this connection, I am directed to clarify that the assessee need not be asked to pay the service tax again. In such cases the matter should be sorted with the P.A.O. As regards to the cases where the assessee was asked to pay service tax again, the amount thus paid may be refunded by the concerned divisional Asstt. Commissioner/Deputy Commissioner.

3. The field formations may suitably be informed.

4. Trade Notice may be issued for the information of the trade.

F. No. 159/2/2003-CX.4

In the matter of The Thar Dry Port

[Order-in-Original No. 507/ST/2009-10 dated 18/06/2010]

Brief Facts:

- Noticee is engaged in providing Cargo Handling Service, Business Auxiliary Services and Storage & Warehousing Services.

- Noticee filed ST-3 Returns for the half year ending 30.09.2005 to 30.09.2004 on 24.10.2005. Thus, there was delay in filing ST-3 Returns.

- Department checked the ST-3 Return and alleged that the Noticee had not paid the service tax of Rs. 1960/- on Business Auxiliary Services; service tax of Rs 9218/- on Cargo Handling Services alongwith interest of Rs. 1301/- for this delay deposited. The deposit of service tax & interest was provisionally made under Cargo Handling Services. Also, it was alleged that the noticee short paid service tax of Rs. 95303/- on Storage & Warehousing services.

- Accordingly, show cause notice was issued to the noticee demanding the amount of service tax short paid on Storage & Warehousing Services, on Business Auxiliary Services and on Cargo Handling services. Penalty was also proposed to be imposed.

Noticee’s Contention:

Noticee had submitted following contentions in their defence: -

¨ Noticee contended that they had deposited the complete amount of service tax along with interest. It was due to a mistake the service tax was deposited under the head “Cargo Handling Service”. But in actuality they had deposited the complete tax along with the interest to the Government. Accordingly, it was requested to adjust the amount.

¨ Noticee relied upon the Board Circular no. 58/07/2003-CX (ST) dt. 20.05.03 in this regard. The Board in this Circular had clarified that the assessee needs not to be asked to deposit the tax again.

¨ With regard to the second allegation in the show cause notice was that the noticee had not gotten the Registration amended and that they have not included all the services provided by them in registration certificate, the Noticee submitted that they have applied for the amendment in the Registration certificate and same has been done by the department. They have enclosed the amended Registration certificate to support their stand.

¨ It was further submitted that this was a procedural mistake and therefore, must be condoned.

¨ They also submitted that the interest was deposited by them to the department and as such the penalty should not be imposed.

¨ Noticee further submitted that they have deposited the tax alongwith the interest before issuance of show cause notice and as such the penalty should not be imposed. They have placed reliance on the decision of the Tribunal in case of Mass Marketing & Advertising Services Pvt. Ltd. v/s C.C.E. Bangalore [2006 (3) S.T.R 333] wherein the penalty was waived when the tax and penalty was paid before issue of show cause notice. Accordingly, Noticee has also submitted that the penalty in their case should also be waived.

Issue Involved:

The issued involved in this matter is

Whether the Noticee has discharged the service tax liability? What is the correct amount of service tax liability?

Whether payment of service tax under wrong head would amount to short payment of service tax and would attract penalty?

Order of the Adjudicating Authority:

The Adjudicating Authority held as under:

Ø It was observed that the Noticee had provisionally deposited Rs. 160971/- vide TR6 Challan dated 17.2.05 (Rs. 33006/- and Rs. 127974/-) for the period from April, 2002 to Sept., 2004. and the show cause notice was relating to the period ending March., 04 and the liability as per the same was Rs. 106481/- . Thus, it was held that there is excess deposit of Rs. 43977/- (160977 – 106481 service tax – 9218 – 1301 interest) relating to half year ending April, 04 to Sept, 04 which is not covered in show cause notice.

Ø The Adjudicating Authority held that in view of provisions of Circular No. 58/07/2003-CX (ST) dated 20.5.2003 relied upon by the Noticee, they could not ask the Noticee to deposit service tax again on classification of service ground.

Ø It was further held that since the noticee had deposited the demanded service tax alongwith interest so the Adjudicating Authority refrained from imposing any penalty and the provisional deposit for Rs. 160977/- is appropriated in the Government account.

Decision of the Adjudicating Authority:

The Adjudicating Authority dropped the proceedings initiated against the Noticee.

Conclusion:

When the service tax has been deposited but under a wrong head, then it cannot be said that there is short payment of service tax and the said amount cannot be demanded again. Otherwise, it will result in the assessee bearing loss on account of double payment. The Adjudicating Authority rightly dropped the proceedings on the basis of Board circular issued in this regard.

Also, when the amount of service tax alongwith interest has been deposited before the issuance of show cause notice, then penalty should not be imposed on the assessee and this relaxation should be extended to the assessee.

********

Comments

PJ/CASE STUDY/2010-11/12
16 July 2010

Post a Comment

Query