2015 (12) TMI 1317 - AT - Service Tax

Adjustment of the amount of service tax paid in excess towards payment of service tax in the subsequent period in terms of Rule 6 (3) of Service Tax Rules - Non fulfillment of condition of the said Rule which required the assessee to refund the value of the taxable service and the service tax paid thereon to the person from whom it was received - Held that - No value of service or service tax had been realised by the appellant from the customers - appellant was entitled to adjust the service tax paid in excess if it had refunded the value of taxable service and service tax thereon from whom it was received. It has been noted by the primary adjudicating authority and has not been disputed by the revisionary authority that the excess payment of service tax was not in relation to any amount recovered for rendition of service from any customer nor was the service tax paid in excess recovered from the customers as it was paid due to calculation errors. Thus, the adjustment made by the appellant is not in violation of the said Rule. - appellant was entitled to such adjustment - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of service tax demand based on adjustment of excess service tax paid.
2. Interpretation of Rule 6(3) of Service Tax Rules, 1994.
3. Application of precedent in Nirma Architects & Valuers Vs. CCE, Ghaziabad case.

Issue 1:
The appeal was filed against the Order-in-Revision confirming a service tax demand due to the appellant adjusting excess service tax paid in a subsequent period without satisfying the condition of Rule 6(3) of Service Tax Rules, 1994. The appellant argued that the excess payment was due to a calculation mistake and not recovered from any person, justifying the adjustment. The Departmental Representative contended that such adjustments required refunding the service tax to the person from whom it was collected, which the appellant did not fulfill. The Tribunal noted that the appellant had paid the excess amount without recovering any value of service or service tax from customers, thus, the adjustment was not in violation of the Rule.

Issue 2:
Rule 6(3) of Service Tax Rules, 1994 allows an assessee to adjust excess service tax paid against the subsequent period's service tax liability if the value of taxable service and service tax is refunded to the person from whom it was received. The Tribunal emphasized that the appellant was entitled to adjust the excess paid service tax as it was not recovered from customers and was paid due to calculation errors. The Tribunal disagreed with the broad interpretation given in the Nirma Architects & Valuers case, stating that the Rule's condition must be mandatorily complied with. Despite the precedent not aiding the appellant, the Tribunal allowed the adjustment based on the merit of the case.

Issue 3:
The appellant cited the judgment in Nirma Architects & Valuers Vs. CCE, Ghaziabad, which held that adjustment of excess service tax paid could be made even without returning it to the client. However, the Tribunal did not agree with this interpretation, emphasizing the mandatory compliance with Rule 6(3). The Tribunal ultimately set aside the impugned order and allowed the appeal based on the appellant's entitlement to the adjustment, irrespective of the precedent cited.

This detailed analysis of the judgment highlights the issues surrounding the confirmation of service tax demand, the interpretation of Rule 6(3) of Service Tax Rules, 1994, and the application of precedent in the Nirma Architects & Valuers case, providing a comprehensive understanding of the Tribunal's decision.