2014 (7) TMI 114 - AT - Service Tax

Suo moto adjustment of excess service tax paid - denial for adjustment with future payments - Held that - A plain reading of the Rule 6(3) shows that if the assessee has paid Service Tax during the particular period for which they have not provided the service to the client and the said Service Tax paid to the department has been either refunded to the client or not collected, in that situation, the excess payment of Service Tax can be adjusted for future payments - if adjustment of excess service tax is not allowed for future payments, the provisions of Rule 6(3) ibid shall become otiose and non-implementable. As the fact that the excess payment is not in dispute and same has been adjusted for the future liability of Service Tax by the appellant, therefore, to pay Service Tax is only an exercise which created hurdle in the smooth functioning of imposition and collection, as held by the Tribunal. Therefore, the adjustment can be allowed - Following decision of Nirma Architects & Valuers 2005 (10) TMI 4 - CESTAT - New Delhi - Decided in favour of assessee.

Summary

Issues:
Adjustment of excess service tax paid in earlier period against future service tax liability.

Analysis:
The appellant appealed against an order disallowing the adjustment of excess service tax paid in a previous quarter against future service tax demands. The appellant paid Rs. 14,62,774/- as service tax for 2001-2002, exceeding the actual liability of Rs. 4,76,933/-. The excess amount of Rs. 9,85,841/- was adjusted against service tax for October 2002 to March 2003. The revenue contended that excess tax paid earlier cannot be adjusted for future payments and issued a notice for short payment. The appellant claimed entitlement to adjust under Rule 6(3) of the Service Tax Rules, 1994, citing relevant case law.

The appellant argued that since they did not collect service tax from clients for 2001-2002, they complied with Rule 6(3) and could adjust the excess payment. The revenue opposed, suggesting the appellant should file a refund claim for excess payment. The Tribunal noted the undisputed excess payment adjustment and the appellant's compliance with Rule 6(3). Referring to the Rule's provision, the Tribunal found that if service tax is paid for a service not provided, the excess can be adjusted for future payments. Citing precedent, the Tribunal rejected the revenue's argument for a refund claim, stating it would render the Rule non-implementable. The Tribunal allowed the adjustment of excess service tax paid for 2001-2002 against the service tax liability for October 2002 to March 2003.

The Tribunal remanded the matter to the Adjudicating Authority for adjustment of the demand for October 2002 to March 2003 with the excess payments for 2001-2002 and to pass an appropriate assessment order. The appeal was disposed of accordingly.