2017 (10) TMI 503 - AT - Service Tax

Short payment of service tax - telephone/telegraph services - adjustment of tax - Held that - factually there may not be any short-payment of service tax. This case may only be of adjustment of excess payment for subsequent short-payment relying on Rule 6(3) and 6(4) of Service Tax Rules, 1994 - in view of the provisions of Rule 6(3) of Service Tax Rules, when such adjustment of Service Tax paid in excess is allowed against the tax liability for the subsequent period, the subject matter is remanded to the original adjudicating authority to decide afresh - appeal allowed by way of remand.

Summary

Issues:
1. Appeal against Order-in-Appeal No.150/2006 dated 18.5.2006.
2. Discrepancy in service tax realization and payment for the period of April 2002 to February 2004.
3. Demand of service tax under telephone and telegraph services.
4. Adjustment of excess service tax paid against subsequent short-payment.
5. Interpretation of Rule 6(3) of Service Tax Rules, 1994.

Analysis:
The appeal before the Appellate Tribunal CESTAT Bangalore involved a case where M/s. BSNL challenged Order-in-Appeal No.150/2006 dated 18.5.2006. The issue revolved around a significant discrepancy noted during the audit concerning the amount realized on account of telephone services and the amount declared in the ST-3 returns for the period of April 2002 to February 2004. The discrepancy led to demands for differential service tax payments for both telephone and telegraph services. The original adjudicating authority confirmed a part of the demand while remanding another part for redetermination.

Regarding the adjustment of excess service tax paid against subsequent short-payment, the appellant argued that they had adjusted an excess amount paid earlier by paying less for the subsequent month. However, the authorities held that this adjustment was not sustainable under the Service Tax Rules. The appellant contended that such adjustments were permissible under the law, citing a decision by CESTAT Delhi in a similar case.

After considering the facts and submissions, the Tribunal found that there might not have been a short-payment of service tax but rather an adjustment of excess payment for subsequent short-payment. Rule 6(3) of the Service Tax Rules, 1994 allows for such adjustments under specific conditions. The Tribunal highlighted that when such adjustments are allowed, the matter should be remanded to the original adjudicating authority for a fresh decision within a specified timeframe after providing the appellant with a personal hearing.

Consequently, the Tribunal set aside the impugned order and allowed the appeal by way of remand, directing the original adjudicating authority to decide on the matter within four months of receiving the order and after granting a personal hearing to the appellant. The judgment was pronounced in open court on 01.09.2017.