2014 (12) TMI 741 - AT - Service Tax

Improper adjustment of wrongly paid service tax paid against the subsequent liability instead of claiming refund - Penalty u/s 76, 77 & 78 - Business Auxiliary Service - Held that - It is not in dispute that the service tax law does not provide for adjustment of excess tax paid against the subsequent liability except in certain specified situations and the present case does not involve those specified situations. Therefore, suo motu adjustment of excess tax paid would not arise in the present case. However, it is on record that the appellant intimated and informed the department of the excess service tax paid and suo motu adjustment towards their liability on 24.4.2006 and thus the department was aware of the suo motu adjustment on 24.4.2006. However, the department has chosen to issue the Show Cause Notice only on 21.12.2009, i.e., after a gap of three and a half years. Under these circumstances, the appellant has made out a prima facie case for wavier of pre-deposit of the dues on account of time bar. Accordingly, we grant unconditional waiver from pre-deposit and stay of recovery of the dues adjudged vide the impugned order during the pendency of the appeal - Stay granted.

Summary

Issues Involved: Appeal against service tax demand, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, adjustment of excess service tax paid, time bar for issuing Show Cause Notice.

Analysis:

1. Service Tax Demand and Penalties: The appeal and stay petition were filed against an Order-in-Original confirming a service tax demand of Rs. 63,76,229 along with interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant, a bank, had paid service tax on Business Auxiliary Service rendered to mutual funds under a mistaken impression of law. The appellant sought to recover the tax from the recipient but was informed that the recipient had already discharged the tax liability. The appellant then adjusted the excess tax paid towards future liabilities and informed the department accordingly.

2. Adjustment of Excess Service Tax Paid: The appellant's contention was that they had intimated the department about the excess service tax paid and the adjustment made towards future liabilities back in April 2006. The department, however, issued a Show Cause Notice only in December 2009, after a significant delay of three and a half years. The law does not allow for the adjustment of excess tax paid against subsequent liabilities unless in specific situations, which were not applicable in this case. Despite this, the appellant's proactive communication with the department regarding the adjustment was acknowledged.

3. Time Bar for Show Cause Notice: The key issue was whether the delay in issuing the Show Cause Notice rendered the demands time-barred and unsustainable in law. The Tribunal found that the appellant had made out a prima facie case for waiver of pre-deposit due to the time bar. Consequently, the Tribunal granted unconditional waiver from pre-deposit and a stay on the recovery of the dues during the appeal's pendency.

In conclusion, the Tribunal ruled in favor of the appellant, acknowledging their communication with the department regarding the adjustment of excess service tax paid and considering the time bar for issuing the Show Cause Notice. The Tribunal granted a waiver from pre-deposit and stayed the recovery of the dues adjudged in the impugned order while the appeal was pending.