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2018 (1) TMI 994 - HC - Service TaxRefund of unutilized CENVAT credit - circular dated 23-8-2007 - case of Revenue is that in view of the circular as well as provisions of law, the assessee cannot be permitted to reverse the entries and in fact should have applied for refund of the amount due to him - Held that - Somewhat similar controversy came up before the Gujarat High Court in case of S. Subrahmanyan Co. v. Commissioner 2011 (3) TMI 396 - CESTAT, AHMEDABAD where it was held that Correction not requiring any lis between the parties.technical view that even in such cases where admitted wrong entries are made and are rectified immediately thereafter, an assessee is required to file refund application is to shake the assessee s faith in the judicial system. There is no error committed by the Tribunal while holding that the amount which has already been paid in cash to satisfy the demand of the revenue with respect to the service tax on GTA is fulfilled, there was no question of not reversing the amount paid from their CENVAT credit account - Further, the circular is dated 23-8-2007 and the period in question is March, 2006 to March, 2007, therefore the Tribunal was right in holding that the circular dated 23-8-2007 is having no application. The amount paid from CENVAT credit account was required to be reversed - appeal dismissed - decided against Revenue.
Issues:
1. Whether the assessee can suo motu credit the amount in its account after paying service tax through CENVAT credit for output transportation service. 2. Whether the circular dated 23-8-2007 restricts the assessee from reversing entries and taking suo motu credit. 3. Whether the judgments of Gujarat High Court and Karnataka High Court support the assessee's right to reverse entries and take suo motu credit. Detailed Analysis: 1. The appeal was filed by the Revenue against an order passed by the Custom, Excise, and Service Tax Appellate Tribunal. The issue arose when the assessee utilized CENVAT credit for paying service tax on output transportation service. The Commissioner (Appeals) directed the assessee to make a pre-deposit of the service tax amount, which the assessee did, and also credited the same amount from the CENVAT credit account. A show cause notice was issued to deny this credit. The Tribunal, relying on judgments of Gujarat and Karnataka High Courts, held that the assessee was entitled to suo motu credit the amount as it was just a correction of entries and not a double payment of duty. 2. The Revenue contended that the circular dated 23-8-2007 mandated the payment of service tax for GTA through cash only, and hence, the reversal of entries by the assessee was impermissible. The counsel for the Revenue argued that the assessee should have applied for a refund instead of reversing the entries. On the other hand, the assessee's counsel cited the judgments of Gujarat and Karnataka High Courts to support the correction of entries by the assessee, emphasizing that duty cannot be paid twice. 3. The High Court referred to the Gujarat High Court judgment in S. Subrahmanyan & Co. case and the Karnataka High Court judgment in Commissioner of C. Ex., Bangalore-III v. Motorola India Pvt. Ltd. Both judgments supported the assessee's right to correct entries made in error and held that the amount paid through CENVAT credit account could be reversed. The High Court agreed with the Tribunal's decision, stating that the revenue's demand for service tax on GTA had been fulfilled by the assessee's cash payment, justifying the reversal of the amount from the CENVAT credit account. In conclusion, the High Court dismissed the Revenue's appeal, upholding the Tribunal's decision that the assessee was entitled to reverse the amount paid through CENVAT credit account as it was a correction of entries and not a double payment of duty. The judgments of Gujarat and Karnataka High Courts supported this position, and the circular dated 23-8-2007 did not apply to the case in question.
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