2018 (4) TMI 1717 - AT - Service Tax

Mode of making payment of service tax - case of the department is that the Postal department made the payment by making entry in their books of accounts and not made the payment electronically - HELD THAT - The Postal Department has made a debit entry in their books of accounts towards payment of service tax. As regard rule 6(2) of Service Tax Rules, 1994 it is only a procedure. If by any other means payment is made merely because it is not made electronically it cannot be said that the payment was not made. Therefore, even if the payment is made by making debit entry it should be accepted as payment of service tax. Except the debit entry no other confirmatory evidence was shown by Postal department.It is only a debit entry appearing in the books of accounts of Postal department there should be a confirmation that the amount which was debited has been credited to the Ministry of Finance. Therefore, the matter needs to be reconsidered on this point only. Appeal allowed by way of remand.

Summary

Issues:
1. Consideration of debit entry in books of accounts as payment of service tax.
2. Requirement of electronic payment under Rule 6(2) of Service Tax Rules, 1994.
3. Absence of confirmatory evidence for debit entry.
4. Verification of payment particulars with Ministry of Finance.

Analysis:

Issue 1: The case revolved around whether a debit entry in the books of accounts of the Postal department should be considered as payment of service tax. The department argued that the payment was not made electronically, thus not fulfilling the requirement. However, the Commissioner (Appeals) allowed the appeal, emphasizing the insufficiency of the Demand Order letter alone to confirm the demand. The Tribunal noted that the Postal department indeed made a debit entry towards service tax payment, and while Rule 6(2) mandates electronic payment, it is primarily a procedural requirement. The Tribunal held that the payment through a debit entry should be accepted as payment of service tax, but emphasized the need for confirmation that the debited amount was credited to the Ministry of Finance.

Issue 2: The Assistant Commissioner argued that Rule 6(2) explicitly mandates electronic payment for service tax, which was not adhered to by the respondent. The Tribunal acknowledged the rule but clarified that non-electronic payment does not nullify the payment itself. The focus was on ensuring the linkage between the debit entry in the Postal department's accounts and the credit entry in the Ministry of Finance's books.

Issue 3: The absence of confirmatory evidence beyond the debit entry was highlighted. The Tribunal stressed the importance of corroborative documentation to establish the flow of funds from the Postal department to the Ministry of Finance. It was deemed necessary to verify this linkage to ascertain the actual payment of service tax.

Issue 4: The Tribunal directed the adjudicating authority to verify the payment particulars with the Ministry of Finance to confirm the flow of funds from the Postal department. This verification process was deemed essential to ensure that the debit entries in the Postal department's accounts were appropriately reflected in the credit entries in the Ministry of Finance's records. The respondent was granted the opportunity to provide necessary evidence to support the payment.

In conclusion, the appeal was disposed of by remanding the case to the adjudicating authority for a fresh order post verification of payment particulars to establish the payment of service tax effectively.