2023 (1) TMI 804 - AT - Service Tax

Adjustment of service tax paid earlier - advance tax vs excess tax - procedure prescribed in Rule 6 - denial of credit on the ground that same does not appear to be advance tax rather is excess payment of tax - Difference of opinion HELD THAT - The registry is directed to place the matter before Hon ble President to consider the difference of opinion to a third Member for resolution. There being difference of opinion between the Members, the following questions are framed for consideration by the ld. Third Member - Q.1. Under the fact that service tax was payable on receipt basis during the period under dispute and admittedly, the assessee paid service tax at the time of raising of the invoice. Such payment has been held to be tax paid in advance by Member (Judicial), qualifying as advance tax under Rule 6(1A) of the Service Tax Rules. OR As held by the Member (Technical) that such payment of tax prior to due date is not advance tax but excess payment of tax qualifying for adjustment under Rule 6(4A) 6(4B). Q.2. As held by the Member (Judicial) that adjustment of advance tax paid has to be allowed in the subsequent period under Rule 6(1A) and the disclosure of tax paid in ST-3 Return, amounts to compliance of the condition in Rule 6(1A) proviso. OR The payment in this case is excess payment of tax and thus, falls under the provisions of Rule 6(4A) and the same cannot be adjusted for failure to comply with the requirements of Rule 6(4B), as held by Member (Technical). Q.3. Whether as held by the Member (Judicial) that the Adjudicating Authority have wrongly applied Rule 6(4A)/6(4B) of the Service Tax Rules, which is applicable in case of provisional assessment and the applicable Rule in the facts of the case is Rule 6(1A)? OR As held by the Member (Technical), Rule 6(1A) (advance payment of tax), Rule 6(4) (provisional assessment of tax) and Rule 6(4A) (excess payment of tax) are different and the applicable Rule is Rule 6(4A) read with Rule 6(4B). Q.4. The Hon ble High Court have remanded the matter to the Tribunal to examine the entitlement of adjustment of tax, as prayed by the Revenue, and the same is not confined to the entitlement under the provisions of Rule 6(4A) and Rule 6(4B). As the provisions of Finance Act, 1994 read with Article 265 of the Constitution of India, does not provide for collection and retention of tax not authorized by law. The Advance/excess tax, admittedly paid should be adjusted for determining the net tax liability, as held by the Member (Judicial). OR In terms of the question framed and answered by the Hon ble High Court, the Tribunal has been directed to examine the eligibility of the adjustment only in terms of Rule 6(4A) and Rule 6(4B), as held by the Member (Technical). Q.5. The application of Rule 6(4A) and Rule 6(4B) are subject to option made by the assessee for payment of tax on provisional basis under Rule 6(4), and are not applicable to service tax paid in advance in terms of Rule 6(1A), as held by the Member (Judicial). OR Rule 6 (1A), Rule 6(4) and Rule 6(4A) read with Rule 6(4B) deal with different situations and in the present case the provision of Rule 6(1A) is not applicable but Rule 6(4A) 6(4B) are applicable as held by the Member (Technical). The Registry is directed to place the appeal records before the Hon ble President for appointment of the ld. Third Member for determining the questions framed herein regarding the difference of opinion.

Issues Involved:
1. Whether the payment of service tax by the appellant qualifies as advance tax under Rule 6(1A) of the Service Tax Rules, or as excess payment of tax under Rule 6(4A) & 6(4B).
2. Whether the appellant's failure to comply with procedural requirements should result in the denial of adjustment of excess tax paid.
3. Whether the Adjudicating Authority wrongly applied Rule 6(4)/6(4A) instead of Rule 6(1A).
4. Whether the Tribunal's remand by the High Court was to examine the entitlement of adjustment only under Rule 6(4A) & 6(4B).
5. Whether the application of Rule 6(4A) & 6(4B) is subject to the option made by the assessee for provisional assessment under Rule 6(4).

Detailed Analysis:

1. Qualification of Payment as Advance Tax or Excess Payment:
The appellant argued that the service tax paid at the time of raising invoices was advance tax under Rule 6(1A) of the Service Tax Rules. The Revenue, however, treated it as excess payment of tax under Rule 6(4A) & 6(4B). The Tribunal observed that the term 'advance tax' is not defined in the statute, and any payment made before the due date is considered advance tax. The appellant paid service tax in advance but failed to inform the Range Superintendent, which was a minor procedural breach. Thus, substantial benefits of tax credit and adjustment should not be denied.

2. Procedural Requirements and Adjustment of Excess Tax:
The appellant contended that the failure to comply with procedural requirements should not result in the denial of adjustment of excess tax paid. The Tribunal found that the appellant had paid excess/advance tax of Rs. 1,77,26,240/-, which was unadjusted or refundable. The Adjudicating Authority had wrongly applied Rule 6(4)/6(4A) instead of Rule 6(1A), and the substantial benefit of credit of tax and its adjustment cannot be denied due to minor procedural lapses.

3. Wrong Application of Rules by Adjudicating Authority:
The Tribunal held that the Adjudicating Authority wrongly applied Rule 6(4)/6(4A) of the Service Tax Rules, which is applicable in case of provisional assessment. The applicable rule in the facts of the case is Rule 6(1A). The Tribunal emphasized that the nature of payment of tax has to be determined on the date of payment and cannot be modified by Revenue.

4. Scope of Tribunal's Remand by High Court:
The High Court had remanded the matter to the Tribunal to examine the entitlement of adjustment only under Rule 6(4A) & 6(4B). The Tribunal noted that the provisions of the Finance Act, 1994 read with Article 265 of the Constitution of India do not provide for the collection and retention of tax not authorized by law. Therefore, the advance/excess tax paid should be adjusted for determining the net tax liability.

5. Application of Rule 6(4A) & 6(4B) and Provisional Assessment:
The Tribunal concluded that Rule 6(1A), Rule 6(4), and Rule 6(4A) read with Rule 6(4B) deal with different situations. In the present case, the applicable rule is Rule 6(1A) and not Rule 6(4A) & 6(4B). The Tribunal directed the Adjudicating Authority to grant the adjustment of advance/excess paid tax from month to month for the whole period of dispute. If any tax or advance tax is found paid in excess after adjustment, the appellant shall be entitled to a refund of such tax along with interest.

Separate Judgments Delivered:
The Member (Judicial) and Member (Technical) delivered separate judgments with differing opinions. The Member (Judicial) held that the payment qualifies as advance tax under Rule 6(1A), while the Member (Technical) held it as excess payment of tax under Rule 6(4A) & 6(4B). The matter was referred to the Hon'ble President for appointment of a third Member to resolve the difference of opinion.

← Previous Next →