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PJ/CASE STUDY/2010-11/42
16 February 2011

Short Payment of Service Tax
 
PJ/Case Study/2010-11/42  

CASE STUDY

Prepared By:
Megha Jain and
Sukhvinder Kaur, LLB [FYIC]

Introduction: -
 
In the case under study, the issue to be determined was that whether there was any short payment of service tax on the part of the assessee. There was only proof of deposition of part of the service tax from the Cenvat Credit account but there was no proof that the rest of the amount of service tax was deposited by the assessee. Therefore, the Department had issued show cause notice demanding the short paid amount with interest and also proposed to impose penalty. 

In the matter of M/s Hotel Rawal Kot, Jodhpur
[Order-In-Original no. 563/ST/2009-10 dated: 06.07.2010]

 
Brief facts of the case: - 
  • Noticee is a hotel having Service Tax registration for providing the service of Mandap keeper. They filed ST-3 Return for the half year ending Sept. 2005 on 25.10.2005. 
  • After scrutiny of ST-3, Department noticed that service tax liability on the Noticee was Rs. 5549/-. Out of this Noticee deposited Rs. 992/- through Cenvat account but the remaining amount of Rs. 4459/- was not paid. It was contended that there was short payment of service tax amounting to Rs 4559/-. It was alleged that by this act the Noticee had contravened the provisions of Section 66 & 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994. 
  • Accordingly, show cause notice was issued to the Noticee demanding service tax short paid with interest and also proposed to impose penalty. 
Noticee’s Contentions: -
 
Noticee replied to the Show Cause Notice on the following contentions: 
  • It was contended that they had rightfully paid the service tax on services of “Mandap keeper” provided by them. 
  • It was submitted that they had deposited the said amount vide GAR7 challans dated 05.05.05, 04.08.05, 05.09.05 and 26.09.05. The amount deposited was Rs. 4559/-[1817+515+1636+591]. Copies of these Challans are attached with the reply. 
  • Thus, it was contended that the amount of service tax alleged to be short paid by them had been deposited in cash vide these challans. Therefore, the allegations are totally baseless and the show cause notice is required to be set aside. 
  • It was further contended that as there was no short payment, they have not contravened any provisions of law and therefore, no recovery can be ordered against them. Also, no penalty is imposable on the Noticee as they have not contravened any of the provisions of the Finance Act, 1994. 
Issue:- 

The issue involved was that -
 
Whether there is any short payment of service tax? 

Finding of the Adjudicating Authority: - 
  • The learned Adjudicating Authority perused the ST-3 returns and ascertained the service tax liability on the Noticee which came to Rs. 5549/-. 
  • It was found that total service tax liability was deposited in following way:- 
Cenvat Credit:                         Rs. 992/-
Challan dated 5.5.2005:    Rs. 1817/-
Challan dated 4.8.2005:    Rs. 515/-
Challan dated 5.9.2005:    Rs.1636/-
Challan dated 26.9.2005:  Rs. 591/-
Total:               Rs. 5549/-
 
  • The Adjudicating Authority found that there was no short payment of service tax and the Noticee had correctly deposited service tax. It was observed that may be the Noticee forgot to tag the copy of TR 6 challan along with ST-3 Return for the half year period ending Sept. 2005. 

Decision of the Adjudicating Authority:-
 
The Deputy Commissioner dropped the proceedings initiated vide show cause notice. 

Conclusion:-
 
The learned Adjudicating Authority justly held that there was no short payment of service tax on behalf of the Noticee. It was clear from the proof i.e. the Challans submitted with the reply that the Noticee had discharged their tax liability. The only problem was that the Department did not have any record of that the Noticee had deposited the tax and directly issued show cause notice. It is suggested that before issuing show cause notice, the Department should enquire from the Assessee about short payment and if the explanation is not satisfactory then issue the show cause notice. The time and money which was utilised in the whole exercise could have been saved.

******

 
 
 
 

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