2007 (4) TMI 124 - AT - Service Tax

Refund(Service tax) - Revenue contended that respondent was not entitle for refund of service tax on the ground that there was no bar for payment of service tax even they paid 100% in cash - Held that excess payment can be adjusted with short payment of service tax in the same period

Summary

Issues: Refund claim rejection, Utilization of service tax credit, Adjustment of excess payment

Refund claim rejection: The case involved an appeal against the rejection of a refund claim of Rs. 1,91,023 filed by the respondent. The respondent provided repair and maintenance services, which became taxable from a certain date. They had paid a total sum during a specific period, with a portion paid in cash and the rest through the service tax account. The original authority rejected the refund claim stating that there was no restriction on paying 100% in cash even if credit was available, and it was not a case of excess payment.

Utilization of service tax credit: The Commissioner (Appeals) disagreed with the original authority's decision. The Commissioner noted that the respondent had paid more than 65% in cash, even though they were eligible to pay only up to 65% in cash and the rest through service tax credit. The Commissioner highlighted that the excess cash payment could be adjusted against the short payment made from the credit account, as the total service tax paid was correct. The Commissioner directed the assistant commissioner to allow this adjustment, considering it a case of excess payment when eligible credit was available.

Adjustment of excess payment: The Commissioner found that the respondent had not fully utilized the available Cenvat credit and had paid more than the permissible percentage in cash. The Commissioner's decision allowed for the adjustment of the excess cash payment against the short payment of service tax for the same period, ensuring that the total service tax liability remained unchanged. The Commissioner's order was deemed reasonable and legally sustainable, leading to the rejection of the Department's appeal.

The judgment highlighted the importance of correctly utilizing service tax credit, ensuring compliance with payment percentages, and allowing adjustments for excess payments when eligible credit is available. The decision provided clarity on the permissible payment methods and the flexibility in adjusting excess payments within the total tax liability framework.