2016 (10) TMI 307 - AT - Service Tax

Suo motu adjustment of excess payment of service tax made in October, 2008 with subsequent service liability - procedural violation - Demand alongwith interest and penalty -Held that - there is no dispute that the appellants have paid excess service tax during the period from April, 2008 to September, 2008. Therefore, they are eligible for getting back the excess amount paid, either by way of refund or by adjustment. The appellants choose to re-adjust the same suo motu. It is apparent that they have not followed the procedures in this regard. However, the fact remains that they were entitled for the amount. Therefore, demand of service tax of the said amount is not sustainable. Consequently, imposition of equivalent penalty under Section 78 is also not sustainable. However in the fitness of things, it would be appropriate that the appellants are given a warning that they should follow the procedures in such respects and Revenue will be at liberty to quote this warning in case of any further violations by the appellants in such respects. - Appeal disposed of

Summary

Issues:
1. Proper adjustment of excess service tax payment
2. Procedural compliance in service tax adjustments
3. Imposition of penalty under Section 78

Analysis:

Issue 1: Proper adjustment of excess service tax payment
The case involved M/s. Oil & Natural Gas Corporation Limited aggrieved by the order-in-appeal regarding the adjustment of excess service tax payment made in October 2008 due to a rent revision from April to September 2008. The Commissioner (Appeals) upheld the demand of service tax, interest, and penalty. The appellant argued that the excess payment was not illegal per se and was mentioned in the ST-3 Returns filed. The Tribunal acknowledged the excess payment but noted the lack of proper procedures in the adjustment. Despite procedural lapses, the Tribunal found the demand for service tax unsustainable as the appellants were entitled to the excess amount, either through refund or adjustment.

Issue 2: Procedural compliance in service tax adjustments
The appellant contended that the adjustment was not illegal per se as they had paid the excess service tax and mentioned it in the ST-3 Returns. However, the Revenue argued that the adjustment was not reflected in the required column of the Returns and violated Rule 6(4B) of the Service Tax Rules. The Revenue also alleged non-intimation to the jurisdictional Superintendent of Central Excise within the stipulated period. Despite acknowledging the procedural lapses, the Tribunal ruled in favor of the appellant, emphasizing their entitlement to the excess amount and cautioning them to adhere to proper procedures in the future.

Issue 3: Imposition of penalty under Section 78
The Revenue contended that the extended period for demand was justified due to suppression and non-compliance. However, the Tribunal found the demand for service tax and the imposition of penalty under Section 78 unsustainable, given the appellant's entitlement to the excess amount. The Tribunal opted to caution the appellants to follow proper procedures in such matters, allowing the Revenue to cite this warning in case of future violations.

In conclusion, the Tribunal set aside the impugned order-in-appeal, warning the appellants to adhere to procedures in service tax adjustments while disposing of the appeal.