2024 (4) TMI 112 - AT - Service Tax

Adjustment of excess service tax paid with subsequent service tax liability - case of Revenue is that Rule 6 (3) of Service Tax Rules, 1994 do not provide for such adjustments - HELD THAT - From perusal of the Rule 6 (3), it is evident that such adjustment is provided in respect of services which were either not provided or partially provided for any reason. The phrase 'partially provided for any reason' would include the short payments made by the recipient or adjustments made by the recipients while making payments to the service provider against any deficiency in the services provided. Commissioner (Appeals) has in the impugned order referred to the credit note dated 31.03.2010 addressed to their client M/s Vipul IT Infrasoft Pvt. Ltd. but have refused to accept the same for a simple reason that the same was issued without any apparent discussion and negotiation and being in respect of only one bill. Accordingly, raised doubt regarding the genuineness of the credit note, the doubt in the mind of Commissioner (Appeals) is specified by any evidence which has been part of record. On the contrary, it is submission of the appellant that the figures stated in the balance sheet for the year 2009-10 wherein the total value of services provided is shown as Rs.24,55,90,004/- instead of Rs.27,63,86,166/- as claimed in the ST-3 returns. After this difference in the true values is on account of the amount refunded by way of issuance of credit note as this amount of Rs.3,24,07,774/- inclusive of service tax of Rs.10,65,330/- was refunded back to their service recipients, the same was excess payment and could have been adjusted as per Rule 6(3) in subsequent returns. On going through sub-rule 3, it is found that the excess amount of service tax paid by the assessee can be adjusted against his service tax liability for the subsequent period. Only condition for eligibility of this sub-rule is that if assessee has refunded the value of taxable service and service tax thereon to the person from whom it was received. Appellant claims that appellant has refunded the excess S-T to its customers - the finding of the Commissioner (Appeal) that this sub-rule is applicable only to the case of excess payment of service tax which can be made good in subsequent period and not to the case where taxable values are not ascertainable for longer period as sub-rule 6(3) does not say so, cannot be agreed upon - appellant s contention is agreed upon that sub-rule 6(3) is not dependent on provision of sub-rule 6(4). Moreover there is no time limit prescribed under sub-rule 6(3) for making adjustment. There are no merits in the observations made by the Commissioner (Appeals) which are on the basis of various presumptions as indicated in the impugned order. As there are no merits in the order in respect of the merits of the issue, the issue of limitation and penalty not considered. Appeal allowed.

Summary

Issues Involved:
1. Adjustment of Service Tax
2. Demand of Interest
3. Imposition of Penalty
4. Invocation of Extended Period

Adjustment of Service Tax:
The appellant, providing various taxable services, was observed during an audit to have wrongly adjusted service tax payment amounting to Rs. 10,65,330/- u/s 6(3) of the Service Tax Rules, 1994, for the period October-November 2010. The appellant contended that they issued a credit note for Rs. 3,24,07,774/- including service tax, which was missed initially but later adjusted in subsequent ST-3 returns. The revenue authorities did not accept this explanation, leading to a show cause notice and subsequent orders confirming the demand. The Tribunal held that Rule 6(3) allows adjustment for services not provided either wholly or partially, including short payments due to deficiencies. The Tribunal found the appellant's adjustment justifiable based on the balance sheet and other records, thus allowing the appeal.

Demand of Interest:
Since the Tribunal found the adjustment of service tax to be valid, it implied that no demand for interest u/s 75 of the Finance Act, 1994, could be sustained. The Tribunal did not explicitly discuss this issue separately, but the implication is clear from the decision on the main issue.

Imposition of Penalty:
The impugned order imposed penalties u/s 77 and 78 of the Finance Act, 1994. The appellant argued that no penalties should be imposed as the ingredients for invoking section 78 were not present and cited several judgments supporting their stance. The Tribunal, agreeing with the appellant on the validity of the service tax adjustment, found no basis for the penalties and did not delve into the issue of penalties separately.

Invocation of Extended Period:
The appellant contended that the demand was time-barred. The Commissioner (Appeals) had justified the extended period on the grounds of suppression of facts. However, the Tribunal, having found the adjustment of service tax valid, did not find it necessary to discuss the issue of limitation and penalties further.

Conclusion:
The Tribunal allowed the appeal, setting aside the demands and penalties imposed by the lower authorities, and upheld the appellant's adjustment of service tax as per Rule 6(3) of the Service Tax Rules, 1994. The judgment was pronounced on 02 April 2024.