2005 (6) TMI 8 - AT - Service Tax

Excess and short payment Excess payment of service tax to be adjusted against deficiency in respect of payment of service tax.

Summary

Issues:
Adjustment of excess Service Tax against short payment under Rule 7 of the Service Tax Rules, 1994.

Analysis:

The appellants filed an appeal against the Order-in-Appeal passed by the Commissioner (Appeals) related to the payment of Service Tax. They submitted a Half Yearly Return from October 1998 to March 1999, paying less Service Tax for October 1998 and January 1999 but more for the other months. The Commissioner (Appeals) held that excess payments could be adjusted against short payments, leading to a demand for the shortfall. The appellants argued that if excess amounts could be adjusted against short payments, there should be no demand, citing Rule 7 of the Service Tax Rules, 1994.

The appellants sought to adjust the excess Service Tax paid against the demand for short payments under Rule 7. Rule 7 outlines the procedure for submitting half-yearly returns, assessing Service Tax payable, and adjusting payments. It mandates that any excess Service Tax paid shall be adjusted against the assessed amount, with the assessee required to pay any deficiency along with interest within ten days of assessment. If the assessed amount exceeds the paid amount, the assessee can apply for a refund under Section 11B of the Central Excise Act, 1944.

Upon review, it was found that the appellants had indeed overpaid Service Tax for several months, with excess amounts paid in November, December 1998, and February, March 1999. Even after adjusting excess payments against short payments for October 1998 and January 1999, the appellants had still paid more than required. The Tribunal noted that Rule 7 allows for the adjustment of excess payments against deficiencies during the return period. Therefore, the Commissioner (Appeals)'s decision to confirm the demand for short payments was deemed unsustainable, and the appeal was allowed, setting aside the demand.

In conclusion, the Tribunal ruled in favor of the appellants, allowing the adjustment of excess Service Tax payments against short payments as per Rule 7 of the Service Tax Rules, 1994. The decision highlighted the procedural requirements for submitting returns, assessing payable amounts, and adjusting payments, emphasizing the assessees' obligations to rectify deficiencies or claim refunds as per the relevant provisions.