2013 (2) TMI 609 - AT - Service Tax

Suo motu credit of the differential amount of service tax - lesser payment made by the customers - held that - In view of clause (ii) of Rule 4B, the monetary limit of Rs. 50,000/- for taking suo motu adjustments cannot also be applied in respect of the appellants. - Technically, there is a violation of Rule 4A inasmuch as the credit has not been adjusted in the succeeding period but the appellants have provided a reasonable explanation as to why this could not be done since the settlement of the value of the services was arrived only on 28-6-2008. - The only other violation is regarding not providing intimation to the jurisdictional officers within 15 days of making adjustment. At the most, for the minor infraction of the rule, some penalty could have been imposed on the appellants but the lower appellate authority has set aside the penalty in its entirety and the Department is not in appeal against the same. The appellants cannot be denied adjustment of the excess tax paid by them as such denial would amount to recovering tax for the same services twice. - Decided in favor of assessee.

Summary

Issues:
Excess payment of service tax in October 2006, validity of suo motu credit adjustment, compliance with procedural rules for adjustment.

Analysis:
1. Excess Payment of Service Tax: The appellants issued invoices in October 2006, paid service tax without receiving the value, leading to an excess payment. The appellants acknowledged the excess payment and agreed to a lesser payment by customers in June 2007, adjusting the differential amount as suo motu credit in their September 2007 return. The impugned show-cause notice was issued in October 2006.

2. Validity of Suo Motu Credit Adjustment: The lower appellate authority confirmed the tax demand and interest, citing three primary grounds. Firstly, it held that suo motu adjustment should occur in the succeeding period, not after a long lapse. Secondly, the appellants failed to inform jurisdictional officers within 15 days as required. Thirdly, the adjustment exceeded the monetary limit of Rs. 50,000.

3. Compliance with Procedural Rules: The appellants argued that Rule 4B(ii) exempted them from the monetary limit due to their registration under Rule 4(2). They explained the delay in adjustment by the settlement of payment disputes in June 2007. While admitting a lapse in informing jurisdictional officers, they contended that this procedural error should not prevent the adjustment of the excess tax paid.

4. Court's Decision: After reviewing the case records, the judge found the appellants had indeed overpaid service tax in October 2006. Considering Rule 4B(ii) and the delay in adjustment due to settlement timing, the judge concluded that denying adjustment would amount to double taxation for the same services. While noting minor procedural violations, the judge set aside the penalty imposed by the lower appellate authority, ultimately allowing the appeal and overturning the demand and interest.

In conclusion, the judgment favored the appellants, emphasizing the technical compliance with rules while ensuring fair treatment regarding the excess tax payment issue.