Pradeep Jain - Chartered Accountant

PJ/CASE STUDY/2010-11/07

08 June 2010

PJ/Case Study/2010-11/07

Case Study

Prepared By:

CA Pradeep Jain,

Megha Jain and

Sukhvinder Kaur LLB[FYIC]

Introduction: -

As per Service Tax Rules, 1994, if excess payment of service tax is made in one quarter/month, then the assessee can make the adjustment of the excess amount paid in the service tax payable in the subsequent period. It is also prescribed that the assessee will have to intimate the Department before making such adjustment of service tax in the subsequent period. However, what if an assessee pays the excess service tax but fails to give intimation to the Department? Whether he will be deprived of his substantial right of adjustment because of breach of procedural condition? The case under study hereunder relates to such issues.

Relevant Legal Provisions: -

Rule 6 (4A) of the Service Tax Rules, 1994: -

(4A) Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

Commissioner of Central Excise, Jodhpur v/s M/s Vinod Textiles Mills

[Final Order no. 398/ST/2009-10 dated 02.02.09]

Brief facts of the case: -

- Respondent is registered under Service Tax Department for providing GTA Service and is filing half yearly returns with the department.

- On scrutiny of ST–3 Returns for the year ending September, 2008 it came to notice of the Department that respondent had deposited part of service tax by adjusting the excess amount of service tax paid in the previous quarter in October, 2008.

- The Department contended that as per Rule 6 (4) A of the Service Tax Rules, 1994 the respondent was required to give intimation to the jurisdictional Superintendent for this adjustment of service tax. And since no intimation was given by the respondent, the adjustment made by them is irregular recalling in short payment of service tax amounting to Rs. 4910/-.

- It was alleged that the respondent had thus contravened the provisions of Rule 6 of the Service Tax Rules, 1944 read with Section 66 & 68 of the Finance Act, 1994.

Question for consideration: -

The question for consideration before the Commissioner was: -

“Whether the substantial benefit can be denied in case there is a procedural lapse?”

Respondent’s Contention: - The respondent made the following submissions during personal hearing: -

¨ That notice in the half year ST–3 Return ending October–March 2008 have made a note that they had made excess deposit of service tax and they will adjust the excess amount in next period.

¨ That they have made department aware of this excess payment.

¨ That the requirement of giving intimation is a procedural irregularity so the benefit of adjustment in subsequent period cannot be denied.

¨ Reliance has been placed upon various cases in which it was decided that credit/ subsequent benefit cannot be denied merely on technical lapse.

¨ That since there is no short payment of service tax so penalty can be imposed.

Reasoning of the Judgment: -

The learned Deputy Commissioner held as under: -

Ø It was held that the respondent had given in their half year ending March, 2008 ST-3 return categorically made a note that there is excess deposit of service tax amount and it will be adjusted in the next period. This can also be termed as intimation.

Ø It was further held that however, as per Rule 6 (4A) of the Service Tax Rules, 1994 the jurisdictional Superintendent should be intimated within a period of 15 days intimation as required under Rule 6 (4A) of Service Tax Rules, 1994 and no doubt in ST-3 return they have shown the adjustment willingness.

Ø It is a technical and procedural lapse. And as held in the case of “Collector v/s National Mechanical Works [1990 (45) ELT –A32 SC]”, the substantive benefit cannot be denied on this procedural lapse.

Decision of the Deputy Commissioner: -

Demand of Service tax under Section 73 of the Finance Act, 1994 is dropped. Penalty under Rule 77 imposed. No penalty imposed under Section 76 of the Finance Act, 1994.

Comments & Conclusion: -

This is a good decision given by the Original Adjudicating Authority. The substantial benefit was not forgone because of procedural lapse by the assessee. Otherwise due to reason of procedural/technical lapses, the assessees will never be able to get the substantial benefit. The procedural lapses should not be given so much importance that an assessee is deprived of his rightful benefit.

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PJ/CASE STUDY/2010-11/07
08 June 2010

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