2019 (4) TMI 1827 - AT - Service Tax

Adjustment of excess deposit of service tax - Business Auxiliary Service - amount received as discount by the appellant as a tour operator from the Air travel agent - Rule 6(4A) read with Rule 6(4B) of Service Tax Rules, 1994 - HELD THAT - The adjustment of excess deposit of service tax is permissible in the succeeding month or quarter as the case may be. However, clause 4B(i) is concerned, the adjustment of excess amount paid, under sub-rule (4A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, valuation or applicability of any exemption notification. There is no dispute regarding the taxability nor of interpretation of law as the appellant had first deposited the tax under Business Auxiliary Service on the commission and discount and thereafter paid tax under the head tour operator - restriction under Rule 6(4B) is not applicable and accordingly the adjustment made by the appellant is held to be allowable - Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is allowed to adjust the service tax under the provisions of Rule 6(4A) read with Rule 6(4B) of Service Tax Rules, 1994.

Analysis:
The appellant, a tour operator, initially treated the discount received from an air travel agent as 'Business Auxiliary Service' commission and paid service tax accordingly. Subsequently, realizing that the receipt should be part of their turnover under 'Tour Operator Service', they adjusted the tax already paid. The main issue revolved around whether such adjustment was permissible under Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994.

The facts revealed that the appellant, during the period from March 2005 to March 2008, paid service tax on the gross amount received from tourists for organizing tours, minus the cost of air travel tickets. An audit highlighted that the appellant received a discount from the air travel agent, leading to a suggestion of tax liability under 'Business Auxiliary Service'. The appellant then promptly paid the service tax as advised. Subsequently, the department directed the appellant to pay service tax under the 'Tour Operator Service' head on the full ticket price, which the appellant did by adjusting the tax previously deposited under 'Business Auxiliary Service'. A show cause notice was issued objecting to this adjustment, leading to further proceedings.

Upon considering Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994, the Tribunal found that the adjustment of excess service tax deposit is permissible in the succeeding month or quarter, provided the excess amount is not due to reasons involving interpretation of law, taxability, valuation, or exemption notifications. In this case, as there was no dispute regarding taxability or interpretation of law, since the appellant had initially paid tax under 'Business Auxiliary Service' and later under 'Tour Operator Service', the Tribunal held that the restriction under Rule 6(4B) did not apply. Consequently, the adjustment made by the appellant was deemed allowable, leading to the setting aside of the demand along with interest and penalty under Section 78. The appeal was allowed, and the decision was pronounced in open court.