2015 (12) TMI 1555 - AT - Service Tax

Adjustment of excess paid service tax rule 6(3) of STR, 1994 change of rate of tax short-payment of service tax demand of tax, interest and penalty alternative treatment advance payment of service tax - rule 6(1A) of STR, 1994 Rules 4A and 4B of STR, 1994 - Held that - when the assessee paid excess amount of tax to the exchequer, law of the land is very clear under Article 265 of the Constitution of India, which says that No tax shall be levied or collected except by authority of law. If Revenue becomes very rigid on strict compliance of the procedure every time and all the time, there could be situations where such rigidness and strictness on the part of the Revenue could become contrary to the provisions of the Article 265 of the Constitution of India. Thus, a liberal interpretation and generous view of these Rules needs to be taken. A combined and liberal view of the Rules is taken, whereunder the adjustment of the excess service tax paid would be allowed during the later period to the appellant assessee appeal allowed decided in favor of appellant.

Summary

Issues:
Adjustment of excess service tax paid by the appellant.

Analysis:
1. The issue revolves around the adjustment of excess service tax paid by the appellant due to a revision in the rate of taxation from 12.36% to 10.3% during a specific period. The appellant continued to charge customers at the old rate, resulting in an excess payment to the exchequer. The Revenue contended that the appellant was not entitled to make this adjustment on their own, leading to a demand for recovery of the excess amount.

2. The appellant argued that the adjustment of excess service tax paid was permissible under Rule 6(3) of the Service Tax Rules, 1994, or alternatively under Rule 6(1A) for payment in advance to the credit of the Central Government. They cited a decision by CESTAT, New Delhi, where a similar adjustment was allowed in a different case.

3. The Revenue countered by stating that the appellant did not strictly fall under the provisions of Rule 6(3), Rule 6(4B), or Rule 6(1A) of the Service Tax Rules, 1994. They argued that the appellant should have filed a refund claim within the prescribed limits instead of making a suo motu adjustment.

4. The Tribunal examined the facts and submissions from both sides. It acknowledged that the appellant had indeed paid excess service tax due to the incorrect application of the tax rate. Despite not strictly falling under specific rules, the Tribunal took a liberal interpretation of the Service Tax Rules, allowing the adjustment of the excess payment made by the appellant during the relevant period.

5. The Tribunal emphasized the constitutional principle that no tax should be levied or collected except by authority of law. It highlighted the importance of not retaining excess tax paid by an assessee, especially when it does not involve issues related to interpretation of law or taxability. The Tribunal's decision was influenced by a previous ruling by CESTAT, New Delhi, which discussed the adjustment of excess service tax payments.

6. Ultimately, the Tribunal allowed the appeal, granting the appellant the benefit of adjusting the excess service tax paid during the relevant period. The decision was based on a comprehensive analysis of the relevant provisions of the Service Tax Rules and the constitutional principles governing tax collection.

(Order pronounced in open court)