2013 (12) TMI 1379 - AT - Service Tax

Demand of service tax - Advance tax paid - Suo moto adjustment of service tax - Held that - appellant had reflected the payment of advance tax particulars both in the returns for the period October 2008 to March 2009 and April to September 2009. From these returns it is evident that what the appellant has made was advance payment of tax and not any excess payment as concluded by the adjudicating authority. The liability to pay the tax arose only in April 2009, but the payment was made in December 2008. Thus the payment made in December 2008, can only be an advance payment of tax and not an excess payment of tax. Even though this contention was raised before the adjudicating authority in the reply to the show-cause notice, the same has not been rebutted by the adjudicating authority in any manner. He has simply dismissed the appeal saying that it is only an afterthought to cover up their lapses in not intimating the excess payment of service tax to the service tax authorities. There was no need for the appellant to make such a submission when they have paid the tax in advance. The order of the adjudicating authority reflects complete non-application of mind - Decided in favour of assessee.

Summary

Issues:
1. Whether the payment made by the appellant in December 2008 was an advance tax payment or an excess payment of service tax.
2. Whether the appellant was liable to pay service tax for the period April to September 2009 based on the payment made in December 2008.
3. Whether penalties imposed on the appellant under Section 76 and Section 77 of the Finance Act, 1994 were justified.

Analysis:

Issue 1:
The appellant, a shipping company, paid service tax amounting to Rs.1,26,80,302/- in December 2008 before receiving consideration for the services rendered. The department alleged this payment was an excess payment, not an advance tax payment, and demanded the same amount for the period April to September 2009. The appellant argued that the payment in December 2008 was indeed an advance tax payment, supported by their returns reflecting the advance tax particulars. The tribunal agreed, noting that the liability to pay tax arose in April 2009, while the payment was made in December 2008, indicating it was an advance payment of tax. The tribunal criticized the adjudicating authority for not rebutting this argument and concluded that the order reflected a lack of application of mind. The tribunal set aside the order, ruling in favor of the appellant.

Issue 2:
The main contention was whether the appellant was liable to pay service tax for the period April to September 2009 based on the payment made in December 2008. The tribunal clarified that since the payment in December 2008 was an advance tax payment, the appellant was not required to make any further payment when they received consideration in April 2009. The tribunal held that the appellant had appropriately adjusted the advance payment against their liability for the subsequent period, April to September 2009. Consequently, the demand for service tax for that period was deemed unjustified.

Issue 3:
Regarding the penalties imposed on the appellant under Section 76 and Section 77 of the Finance Act, 1994, the tribunal found them unwarranted. The tribunal noted that the appellant had paid the tax in advance, and the penalties were based on the assumption that the payment in December 2008 was an excess payment, which the tribunal had determined to be incorrect. Thus, the penalties were deemed unjustified, and the tribunal allowed the appeal, setting aside the penalties as well.

In conclusion, the tribunal ruled in favor of the appellant, holding that the payment made in December 2008 was an advance tax payment, not an excess payment, and that the demand for service tax for the subsequent period was unwarranted. The penalties imposed on the appellant were also set aside as they were based on an incorrect premise.