2017 (7) TMI 409 - AT - Service Tax

Self adjustment of excess paid service tax - Rule 6 (4A) read with Rule 6(4B) (3) - Held that - appellant already claimed the refund for excess amount adjusted against the service tax liability for the month of April 2010 and the said refund was already sanctioned this clearly shows that the amount which was refunded was also adjusted accordingly there was short payment of service tax in the month of April 2010 to that extent therefore demand of service tax for the excess adjustment of service tax is correct. Interest - Held that - since there is delay in payment of service tax on the due date till appropriation i.e. 22-8-2011 interest is clearly chargeable - interest upheld. Penalty u/s 76 and 77 - Held that - the adjustment was made by the appellant due to interpretation of provision of Rule 4(A) and 4(B) - Moreover excess paid service tax even though not adjustable the same was lying with the government exchequer therefore there is no malafide intention on the part of the appellant in doing adjustment of excess paid service tax - penalty set aside by invoking section 80. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Adjustment of excess service tax paid, demand of service tax, interest on delayed payment, penalty imposition.

Adjustment of Excess Service Tax Paid:
The case involved the appellant, a manufacturer of "Motor Vehicle, Cast Articles," who had paid excess service tax in March 2010, which they adjusted against the liability for April 2010. The department objected, citing Rule 6(4A) and Rule 6(4B)(3) which allow adjustment of only up to ?1 lakh. The appellant adjusted ?2,56,757, leading to a proposed recovery of ?1,56,757 with interest. The appellant also claimed a refund, which was granted but then appropriated. The appellant argued that as they had adjusted the excess amount correctly, there should be no demand, as it was not a case of short payment.

Demand of Service Tax:
The adjudicating authority confirmed the demand for the excess adjustment, along with recovery of interest under Section 75 of the Finance Act and penalties under Sections 76 and 77. The appellant's counsel contended that since the excess payment was not a case of short payment, interest and penalties were unwarranted.

Interest on Delayed Payment:
The Revenue argued that since the excess amount beyond ?1 lakh was not adjustable, there was a short payment in April 2010, justifying the demand, interest, and penalties. The appellant's counsel maintained that interest and penalties were not applicable as the excess payment was not due to short payment but an adjustment of the amount lying with the government.

Penalty Imposition:
The Tribunal considered both sides' arguments and records. It upheld the demand for service tax due to the short payment resulting from the excess adjustment. Interest was deemed chargeable due to the delay in payment until the appropriation date. However, the Tribunal set aside the penalties imposed under Sections 76 and 77, citing the appellant's lack of malafide intention and the circumstances surrounding the adjustment. The Tribunal partially allowed the appeal, modifying the impugned order accordingly.

This judgment highlights the intricacies of service tax adjustment, the distinction between short payment and excess payment, the applicability of interest and penalties, and the importance of interpreting tax provisions accurately to avoid penalties.