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2018 (4) TMI 973 - AT - Service TaxAdjustment of excess service tax - main allegation in the SCN is that the appellants are not entitled to adjust the excess amount of service tax paid - time limitation - Held that - the appellant vide the said letter dated 3.3.2006 has specifically stated that the excess payment of service tax of ₹ 40,02,782/- shall be adjusted against their future liability on taxable services during the current financial year. The department was fully aware that the appellant have adjusted the payment of service tax excess paid by them during the subsequent month but inspite of that the department did not issue any show-cause notice for more than three years and finally a SCN was issued on 21.12.2009 seeking demand of service tax for the period from 01.04.2006 to 31.03.2008 by invoking the extended period. The entire demand in the present case is barred by limitation of time - appeal allowed - decided in favor of appellant.
Issues:
1. Confirmation of demand of service tax along with interest and penalty by the Commissioner. 2. Barred by limitation of time. 3. Adjustment of excess service tax paid on account of error in calculation. 4. Judicial precedents supporting such adjustments. Analysis: Issue 1: Confirmation of demand of service tax along with interest and penalty by the Commissioner The appeal was filed against the order passed by the Commissioner confirming the demand of service tax along with interest and penalty. The appellant, registered under 'Banking and Other Financial Services' and 'Business Auxiliary Services' for mutual fund distribution, had discrepancies in the payment of service tax. The appellant admitted to the short payment of service tax for certain financial years and had also paid excess service tax in a previous year. The Commissioner, after due process, confirmed the demand, including interest and penalties under relevant sections of the Finance Act, 1994. Issue 2: Barred by limitation of time The appellant argued that the demand made by the Commissioner was time-barred, invoking the extended period of limitation. The appellant contended that the excess service tax paid was intended to be adjusted against future liabilities, and the department was duly informed about this adjustment. The Tribunal found that the demand was indeed barred by limitation as the department failed to issue a show-cause notice for more than three years after the adjustment was made. No evidence of suppression of facts to evade service tax payment was found, leading to the conclusion that the demand was time-barred. Issue 3: Adjustment of excess service tax paid on account of error in calculation The appellant maintained that the excess service tax paid was due to an error in calculation and was promptly pointed out to the department. The appellant intended to adjust this excess payment against future liabilities, as clearly communicated in various letters and revised service tax returns. The Tribunal noted that the adjustment was made in accordance with the appellant's communication and that the department was aware of this adjustment. Despite this, the department initiated an audit enquiry after a significant lapse of time, leading to the conclusion that the demand was time-barred. Issue 4: Judicial precedents supporting such adjustments The appellant cited various judicial precedents where adjustments of excess service tax payments had been allowed in favor of the assessee. These judgments were presented to support the argument that the adjustment made by the appellant was in line with established legal principles. However, the Tribunal primarily focused on the issue of limitation and held that since the demand was time-barred, it was unnecessary to delve into the merits of the case. The appeal was allowed on the grounds of limitation, setting aside the impugned order with consequential relief. In conclusion, the Tribunal allowed the appeal based on the finding that the demand of service tax, interest, and penalty was time-barred due to the department's failure to act within the prescribed period. The Tribunal did not delve into the merits of the case, as the primary issue of limitation was determinative in this instance.
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