2014 (2) TMI 438 - AT - Service Tax

Adjustment of service tax under Rule 6(3) - excess payment of service tax due to refused / cancelled of policies - taxable service which is not provided either wholly or partially for any reason - Held that - . For deciding this case the question whether refunds reached only up to intermediary and not to the person who actually took the policy is a relevant fact on which clarity is required. The issue does not seem to be deliberated upon and decided by the Tribunal in order dated 26-06-12. 2012 (9) TMI 772 - CESTAT, CHENNAI - Matter remanded back for de-novo adjudication.

Summary

Issues Involved:
1. Legality of adjustments under Rule 6(3) of Service Tax Rules, 1994.
2. Verification of refunds to insured through intermediaries.
3. Compliance with procedural requirements in adjudication.

Detailed Analysis:

1. Legality of Adjustments under Rule 6(3) of Service Tax Rules, 1994:
The core dispute revolves around whether the adjustments made by the appellant for service tax refunds on cancelled insurance policies during the period 01-10-2007 to 31-01-2011 were in conformity with Rule 6(3) of the Service Tax Rules, 1994. The rule allows an assessee to adjust excess service tax paid against future liabilities if the service was not provided and the tax was refunded to the person from whom it was collected. The appellant contends that they refunded the amounts to intermediaries, which should suffice under Rule 6(3). However, there is a legal contention on whether the refund to intermediaries alone is sufficient or if it must be proved that the refund reached the insured.

2. Verification of Refunds to Insured through Intermediaries:
In the first round of litigation, the Tribunal had mandated verification of refunds to intermediaries by the adjudicating authority. The appellant provided detailed information and claimed compliance with Rule 6(3) by refunding amounts to intermediaries. However, the adjudicating authority's report, prepared without hearing the appellant, indicated an inability to verify the refunds due to incomplete data. The Tribunal observed that the appellant had submitted data for one period but faced difficulties for the other two periods. The appellant argued that refunds to intermediaries should be deemed sufficient, while the Revenue insisted on proving refunds to the insured. The Tribunal emphasized the need for cooperation between both parties to resolve the factual dispute through test checks and verification.

3. Compliance with Procedural Requirements in Adjudication:
The Tribunal noted procedural lapses in the adjudication process. The report by the Jurisdictional Assistant Commissioner was prepared without hearing the appellant and without proper scrutiny of the submitted data. The adjudicating authority did not disclose the report to the appellant or verify the data provided. The Tribunal directed a de novo adjudication to rectify these faults, ensuring that the appellant is given an opportunity to furnish data and that the adjudicating authority verifies and records the findings comprehensively. The Tribunal also highlighted the need for detailed documentation of the data submitted, including descriptions and totals, to facilitate clear understanding and verification.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for de novo adjudication, emphasizing the need for thorough verification of refunds, proper procedural compliance, and cooperation between the parties. The appeal was allowed by way of remand, and the stay petition was disposed of accordingly.