2019 (11) TMI 1266 - AT - Service Tax

Adjustment of excess paid service tax - appellant had adjusted the excess payment made by them during the period April 2015 to June 2016 in September 2016 - Revenue objected to the adjustment made on the ground that as per Rule 6(4A) of Service Tax Rules, 1994, the excess service tax paid could be adjusted only in the immediate succeeding month or quarter - HELD THAT - From Rule 6(4A) of Service Tax Rules, 1994, it can be seen that the word immediate is absent in the Rule. The Rule says that the assessee can adjust the excess amount paid by him against the service tax liability for the succeeding month or quarter, as the case may be. In September 2016, appellant realized the excess payment made during April 2015 to June 2016 and adjusted it in September 2016 while filing returns. The excess amount paid by appellant during April 2016 to June 2016 has been allowed by department to be adjusted in September 2016, holding the view that it is adjusted in the immediate succeeding quarter. However, the excess payments made by appellant from April 2015 till March 2016 was not allowed to be adjusted for which the present demand has been made. The demand therefore does not arise out of short-payment of tax. In the present case, the period for which excess payment has been disallowed is from April 2015 to March 2016. Even if the assessee files a refund claim in September 2016, when he realized that there is excess payment, the claim would be well within the time limit under section 11B. Further, it is also brought out from the record that the assessee has not collected service tax from the customer and therefore not passed on the tax burden to another. This being the case, the appellant would be otherwise eligible for refund. The provision for adjustment is to avoid the hassles of refund - The adjustment made by the assessee in the month of September 2016 can be said to be adjustment in accordance with Rule 6(4A) of the Service Tax Rules, 1994. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Adjustment of excess service tax paid by the appellant according to Rule 6(4A) of Service Tax Rules, 1994.
2. Interpretation of the provision regarding adjustment of excess service tax by the department.
3. Eligibility of the appellant for refund and the legality of the adjustment made.
4. Applicability of precedents and judgments in similar cases to determine the outcome of the appeal.

Analysis:

Issue 1: Adjustment of Excess Service Tax
The appellant engaged in construction and sale of flats adjusted excess service tax paid during April 2015 to June 2016 in September 2016. The department contended that Rule 6(4A) allows adjustment only in the immediate succeeding month or quarter. The appellant argued that the provision does not specify "immediate" and that adjustment was valid as excess payment was for immovable property transactions not subject to service tax. The department allowed adjustment for April 2016 to June 2016 but demanded payment for the earlier period.

Issue 2: Interpretation of Rule 6(4A)
The department interpreted Rule 6(4A) to restrict adjustment to the immediate succeeding month or quarter. The appellant argued against this interpretation, citing precedents where excess payments could not be retained by the department. The absence of the word "immediate" in the rule was highlighted to support the appellant's case for adjustment beyond the immediate period.

Issue 3: Eligibility for Refund and Legality of Adjustment
The appellant's eligibility for refund was discussed, emphasizing that no service tax burden was passed to customers. The adjustment made in September 2016 was deemed valid under Rule 6(4A) to avoid refund hassles. Precedents supported the appellant's position that non-intimation to the department about the adjustment was a procedural lapse, and excess payment for services not rendered could not be retained by the department.

Issue 4: Applicability of Precedents
The Tribunal referred to various judgments supporting the appellant's right to adjust excess service tax payments. The decisions highlighted that excess payments not related to services rendered could not be retained by the department. The Tribunal concluded that the impugned order could not sustain, setting it aside and allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the adjustment of excess service tax payments beyond the immediate succeeding month or quarter as per Rule 6(4A) and based on legal precedents.