2019 (6) TMI 268 - AT - Service Tax

Adjustment of excess payment of service tax made - whether any excess payment made by the assessee of service tax and the same adjusted in subsequent months from the output tax payable, whether the revenue authority justified in objecting to such adjustment on the ground that in view of rule 6(4) of the service tax rules such adjustment could have been done only in the immediately subsequent month and not after a gap of 34 months? HELD THAT - Sub rule 4A was substituted by notification No. 1 of 2007 ST dated 1 March 2007 with effect from the same date. The appellant is entitled to make adjustment for excess tax paid and there is no such restriction under the scheme of the act read with the rules. Adjustment allowed - appeal allowed - decided in favor of appellant.

Issues:
1. Whether adjustment of excess service tax paid by the assessee in subsequent months is permissible under rule 64 of the service tax rules.
2. Validity of show cause notice issued for excess service tax payment.
3. Applicability of pre-deposit requirement under section 305F of the central excise act for appeal.
4. Interpretation of sub rule 4(a) of rule 6 of the service tax rules regarding excess tax payment adjustment.
5. Comparison with previous tribunal rulings on similar cases.

Issue 1: Adjustment of Excess Service Tax Payment:
The appeal questioned whether the revenue authority was justified in objecting to the adjustment of excess service tax paid by the assessee in subsequent months, considering rule 64 of the service tax rules. The show cause notice highlighted instances where excess payments were adjusted after significant periods, leading to disallowance and imposition of penalties. The appellant argued that sub rule 4(a) of rule 6 allows for such adjustments without any specific time restriction, citing previous tribunal judgments to support their case. The Tribunal agreed with the appellant, emphasizing that the act and rules do not impose limitations on the timing of such adjustments, thereby allowing the appeal and setting aside the impugned order.

Issue 2: Validity of Show Cause Notice:
The show cause notice was issued based on audit findings regarding excess service tax payments made by the appellant. However, the appellant contended that the notice did not address any demand for unpaid or short-paid taxes but rather focused on disallowing adjustments. Despite this argument, the Commissioner (Appeals) dismissed the appeal due to non-compliance with the pre-deposit requirement under section 305F of the central excise act. The Tribunal did not delve further into this issue as the appeal was allowed on other grounds.

Issue 3: Pre-deposit Requirement for Appeal:
The appellant raised concerns about the pre-deposit requirement under section 305F, stating that it was a case of disallowance of adjustment rather than a demand for unpaid taxes. However, the Commissioner (Appeals) dismissed the appeal for non-compliance with the pre-deposit condition. The Tribunal did not provide a detailed analysis of this issue as the appeal was allowed based on the interpretation of rule 6 of the service tax rules.

Issue 4: Interpretation of Sub Rule 4(a) of Rule 6:
The appellant's argument centered around sub rule 4(a) of rule 6, which allows for the adjustment of excess tax paid against future liabilities without specific time constraints. The Tribunal examined the legislative intent behind this rule and concluded that the appellant was entitled to make such adjustments in subsequent months or quarters as deemed fit, without any restrictions under the act and rules. Relying on previous tribunal rulings and the wording of the rule itself, the Tribunal favored the appellant's interpretation and allowed the appeal with consequential benefits.

Issue 5: Comparison with Previous Tribunal Rulings:
The Tribunal referenced previous tribunal rulings, such as Plantech Consultants Pvt Ltd. versus CCE Pune-1 and JCT Electronics Ltd versus CCE NST, to support the appellant's argument regarding the permissibility of adjusting excess tax payments. By highlighting the consistency in these rulings and the absence of specific time constraints in the relevant rules, the Tribunal reinforced its decision to allow the appeal and set aside the impugned order.

In conclusion, the Tribunal allowed the appeal, emphasizing the absence of time restrictions for adjusting excess service tax payments in subsequent months or quarters, as permitted by sub rule 4(a) of rule 6 of the service tax rules. The decision was supported by the interpretation of relevant provisions and consistent tribunal rulings on similar cases.

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