2013 (8) TMI 335 - AT - Service Tax

Adjustment of service tax liability under Rule 6(3) - refund of amount received towards taxable services - Interest and Penalty Refund made directly to the insured and Refund paid through intermediaries - Revenue doubted the correctness of the amounts adjusted in ST-3 returns towards refund for the period and called for verification of the amounts to ensure that the adjustments were correctly claimed - Held that - Order of the adjudicatory authority was set aside - matter remanded back for de-novo adjudication considering the observations of the Tribunal this order was not a bar to passing any appropriate order in accordance with law if any revenue loss was demonstrable - evidence should be disclosed to the assesse and they should be given an opportunity to present their defense. Service tax Rules do not prescribe the method of doing any business or maintaining account - The approach of the authorities should facilitate smooth conduct of business by reducing manual work for every assessee if they arrange to do so - The contention that credits made in the books of accounts of the assesse in the name of an intermediary do not amount to refund to the intermediary could not be accepted If Revenue had any doubt that the full amount was not being refunded and refund from government was claimed for more than the amount actually being refunded to the insured a clear case based on facts which will prove such malpractices should be bought out Decided in favor of assesse.

Summary

Issues:
1. Adjustment of service tax refunds against subsequent liabilities.
2. Verification of refunds directly paid to insured.
3. Treatment of refunds through intermediaries.
4. Disallowance of adjustments in ST-3 returns.
5. Discrepancies in documentary proof.
6. Interpretation of Rule 6(3) of Service Tax Rules.
7. Practice of industry in handling premium refunds.
8. Revenue's concern over revenue loss.
9. Compliance with Tribunal's previous order.

Analysis:
1. The appellant, providing general insurance services, adjusts service tax refunds against subsequent liabilities as per Rule 6(3) of Service Tax Rules.
2. Discrepancies arose regarding refunds directly paid to insured, leading to disallowance of adjustments in ST-3 returns due to lack of documentary proof.
3. Refunds through intermediaries were questioned by the Revenue, challenging the treatment of credits in the accounts of intermediaries as refunds.
4. The appellant faced challenges in producing old vouchers authorizing refunds, citing volume of records and past period issues.
5. The Tribunal emphasized the need for proper verification and compliance with guidelines, as seen in a prior case remanded for re-verification.
6. The interpretation of Rule 6(3) was crucial in determining the eligibility of adjustments and preventing potential revenue loss.
7. The industry practice of handling premium refunds through intermediary accounts was defended by the appellant, highlighting the operational efficiency and standard procedures.
8. Revenue raised concerns over the actual refund amounts reaching insured individuals and the potential for abuse of the system.
9. The Tribunal upheld the previous order, remitting the matter for de-novo adjudication, emphasizing the need for evidence of revenue loss and providing the appellant with an opportunity to present a defense.