2014 (8) TMI 589 - AT - Service Tax

Adjustment of excess tax paid - Telephone services - Whether the assessee during the period of dispute were permitted to adjust excess amount of service tax paid for certain months against their service tax /education cess liability for the subsequent months - The department s contention is that for such adjustments under Rule 6(4A) read with Rule 6(4B), the assessee should have obtained centralized registration under Rule 4(2) - The other conditions are that an assessee with centralized registration under Rule 4(2) can adjust excess payment in one month against this tax liability in other months without any limit, for other assessee, there is a monetary limit of Rs. One lakh for such adjustment. Held that - The excess payment referred to in sub-rule (4A) read with sub-rule (4B), is like advance payment under sub-rule (1A) of Rule 6. There is no condition in Rule 6(4A) read with Rule 6(4B) providing that for availing of the adjustment facility, the assessee must have opted for centralized registration under Rule 4(2). Moreover when an assessee during certain months, for reasons other than interpretation of law, taxability, classification, valuation or applicability of exemption, has paid service tax in excess of his actual tax liability, the Government cannot retain the excess tax paid by the assessee by refusing its adjustment against his tax liability during other months and refusing adjustment of such excess tax payment during a month against tax liability during other months and appropriation and retention of the same would amount to collection of tax without the authority of law which is contrary for the provisions of Art 265 of the Constitution of India. Therefore, if excess payment of tax in a month is not on account of reasons involving interpretation of law, taxability, classification, valuation or applicability of exemption notification and is purely on account of inability of the assessee to exactly determine the total amount collected during the month against the bills raised, as a result of which he had determined his tax liability or estimation basis, the excess amount of tax paid during the month can be adjusted against his tax liability during other months and in this regard, there cannot be any monetary limit - Decided in favour of assessee.

Summary

Issues:
Whether the appellant was permitted to adjust excess service tax paid against subsequent liabilities without centralized registration under Rule 4(2) of the Service Tax Rules, 1994.

Analysis:
The appellant, engaged in providing taxable telephone services, adjusted excess service tax paid in previous months against liabilities for November 2006 and January 2007. The Joint Commissioner confirmed a demand against the appellant under Section 73(1) of the Finance Act, 1994, stating that only centralized registration under Rule 4(2) allowed such adjustments. The Commissioner (Appeals) upheld this decision, leading to the current appeal.

The appellant argued that Rule 6(4A) allows adjustment of excess payments without centralized registration, as long as the excess is not due to legal interpretation issues. They contended that no such condition exists in the rule. The Departmental Representative, however, insisted on the necessity of centralized registration for adjustments under Rule 6(4A).

The Tribunal analyzed Rule 6 of the Service Tax Rules, emphasizing sub-rules (3) and (4) regarding adjustments and provisional assessments. It noted that Rule 6(4A) allows excess payment adjustments, provided they are not due to legal interpretation issues. The Tribunal clarified that centralized registration under Rule 4(2) is not a prerequisite for such adjustments. It highlighted that excess payments are akin to advance tax payments and can be offset against future liabilities, as per the law.

The Tribunal referred to a Supreme Court ruling emphasizing higher legal norms prevailing over lower ones. It concluded that if excess payments are not due to legal interpretation issues but to the inability to determine exact amounts received, adjustments are permissible without monetary limits. The Tribunal set aside the previous orders, allowing the appeal.

In summary, the Tribunal ruled in favor of the appellant, permitting them to adjust excess service tax payments against subsequent liabilities without centralized registration under Rule 4(2) of the Service Tax Rules, 1994.