2017 (11) TMI 426 - AT - Service Tax

Short payment of service tax - time limitation - proviso to Section 73 of the Act - Held that - the demand in the present case is hopelessly barred by limitation as the SCN was issued on 31.12.2007 for the period February 2006 and there is no allegation of suppression of information with intent to evade payment of duty - the fact that M/s. MSIL made excess payment to the appellant on account of certain irregular billing was made known to the appellant only in the month of June 2005 and more particularly from the letters dated 10.06.2005 and 27.06.2005 of MSIL. These excess payments made to the appellants were deducted by the said MSIL during the period May 2005 to February 2006 and therefore the question of reporting this excess payment or discrepancy by the appellants in their return filed for half year ending March, 2005 does not arise and therefore invoking the extended period on the ground that till the audit objection the appellants have not brought out the discrepancy in their return filed for the half year ending March, 2005 is not sustainable. Appeal of the appellant allowed both on merit as well as on limitation.

Summary

Issues:
Appeal against Order-in-Original rejecting appeal and upholding service tax demand, interest, and penalties - Allegation of short payment by wrong calculation - Excess payments by another entity adjusted by appellant - Applicability of extended period for demand - Validity of self-adjustment under Rule 6(3) of Service Tax Rules.

Analysis:

The appeal was filed against the Order-in-Original confirming a service tax demand of ?1,49,380 on Air Travel Agent Services & Cargo Handling Service for February 2006. The appellant, M/s. Jet Air Pvt. Ltd., had allegedly short paid the service tax due to wrong calculation. Additionally, M/s. MSIL had made excess payments for the period from April 2004 to March 2005, which the appellant deducted from the service tax payable for February 2006. The original authority confirmed the demand, imposed interest of ?12,251, and penalties under Sections 76 and 78 of the Finance Act 1994 for contravention of Section 67 of the Act and Rule 6(3) of the Service Tax Rules 1994.

The appellant contended that the impugned order was unsustainable as it did not consider submissions, binding judicial precedents, and provisions of the law. They argued that the demand was time-barred and that there was no intent to evade service tax. The appellant relied on judicial decisions emphasizing that mere omissions without willful intent cannot justify invoking the extended period. They also highlighted the permissibility of self-adjustment under Rule 6(3) of the Service Tax Rules 1994, citing relevant case laws supporting their position.

The Appellate Tribunal noted that the demand was time-barred as the show-cause notice was issued beyond the statutory period, and there was no allegation of suppression with intent to evade payment. The excess payments made by M/s. MSIL were communicated to the appellant only in June 2005, and the self-adjustment made by the appellant was found to be valid under Rule 6(3) of the Service Tax Rules. Relying on the appellant's submissions and relevant case laws, the Tribunal held that the impugned order was unsustainable in law. Consequently, the appeal was allowed both on merit and limitation, setting aside the original order.

In conclusion, the Tribunal's decision emphasized the importance of considering statutory limitations, intent to evade payment, and the permissibility of self-adjustment under the relevant rules. The judgment provided clarity on the applicability of the extended period for demand and upheld the appellant's right to adjust excess payments in accordance with the law.