2006 (1) TMI 32 - AT - Service Tax

Service Tax - Assessee paid the service tax to Department of Telecommunication (DOT) - Amount not being paid to credit of Central Govt. - Assessee is not entitled for any adjustment in terms of the Rule 6(3) of Service tax Rules, 1994 - Demand - SCN - Limitation

Summary

Issues:
1. Interpretation of Rule 6(3) of Service Tax Rules, 1994 regarding adjustment of Service tax.
2. Whether adjustment permissible if Service tax paid to DOT.
3. Time-bar for demand raised in show cause notices.

Detailed Analysis:
1. The appeal was filed by the Revenue against the order-in-appeal passed by the Commissioner (Appeals) regarding the adjustment of Service tax under Rule 6(3) of Service Tax Rules, 1994. The respondents, providers of cellular phone services, charged Service tax from customers and paid charges along with Service tax to DOT for junction links. The Revenue issued show cause notices denying the adjustment of Service tax paid to DOT. The adjudicating authority confirmed the demand and imposed a penalty.

2. The Revenue contended that Rule 6(3) allows adjustment only if the assessee has refunded the value of Service tax to the persons from whom it was received. As the appellants paid the Service tax to DOT, no adjustment was permissible under the Rule. The Revenue argued that the appellants did not disclose these facts in the return, making the finding of the Commissioner (Appeals) on time-bar unsustainable.

3. The respondents argued that as per a Circular by the Central Board of Excise and Customs, no Service tax is payable for junction connectivity provided by DOT. They claimed to have paid the Service tax wrongly, which was subsequently adjusted. The respondents maintained that they specifically mentioned this adjustment in the return, precluding any suppression allegation.

4. The Tribunal found that Rule 6(3) allows adjustment if the Service tax was paid to the credit of the Central Government for a taxable service not provided by the assessee, and the value of Service tax was refunded to the recipients. Since the respondents paid the Service tax to DOT and did not refund any amount, they were not entitled to the adjustment. The Commissioner (Appeals)'s decision allowing the adjustment was set aside.

5. Regarding the limitation, the Tribunal noted that the demand raised in the show cause notice within the normal limitation period was not time-barred. As the appellants were not entitled to the adjustment, the demand in the show cause notice was upheld. The demand in another show cause notice was deemed time-barred as the respondents had declared the reasons for the adjustment in their return, negating any suppression allegation.

6. In conclusion, the appeal was disposed of with the Tribunal ruling against the adjustment of Service tax paid to DOT and upholding the demands raised within the limitation period.