2024 (7) TMI 108 - AT - Service Tax

Wrongful availment of CENVAT Credit and utilization of the same - refund of excess service tax paid - Rule 6(4)(A) of Service Tax Rules, 1994 - HELD THAT - It is found from SCN and original order that there was case of wrong availment of CENVAT Credit. Even the show cause notice proposed Service Tax short paid, there was no proposal in the show cause notice of wrongly availed cenvat demand. In normal course demand of cenvat is raised under Rule 14 of CENVAT Credit Rules which is not the case here. The adjudicating authority has also decided the matter considering the adjustment of excess paid Service Tax. Therefore, it is apparent from the grounds of appeal that the appeal filed by the revenue is absolutely on wrong footing. Therefore, the order of the commissioner appeal also passed assuming the issue is of wrong availment of CENVAT Credit is completely vitiated and not maintainable on this ground alone. Moreover, on the facts of the case there is excess payment of Service Tax on the same service therefore the excess amount of Service Tax paid either by service recipient or by the appellant either needs to be refunded or the same may be allowed as adjustment in the future tax liability. The appellant is entitled either for refund of 50% for excess paid Service Tax or for adjustment against the excess paid towards the future tax liability. As result, the adjustment made by the appellant of excess paid service tax towards the subsequent tax liability is absolutely in order and correct. There are no error in the order passed by the Adjudicating Authority. However, the impugned order passed by the learned Commissioner (Appeals) suffers from apparent error and illegality. Hence, the same is not sustainable - the impugned order is set aside - appeal allowed.

Summary

Issues:
1. Adjustment of excess paid Service Tax against subsequent liability.
2. Validity of demand raised by the revenue.
3. Applicability of CENVAT Credit rules.
4. Maintainability of revenue's appeal before Commissioner appeal.
5. Refund or adjustment of excess paid Service Tax.

Analysis:
1. The appellant, engaged in renting immovable property service, paid 100% Service Tax, while the tenant also paid 50% as per a Supreme Court interim order, resulting in excess payment. The appellant sought to adjust this excess against future tax liability. The Adjudicating Authority allowed the adjustment, except for a small amount. The revenue challenged this decision, claiming the adjustment was impermissible. The Commissioner appeal upheld the demand. The appellant argued for the adjustment under Rule 6(4)(A) of Service Tax Rules, citing a Supreme Court judgment. The Tribunal found the adjustment valid, as there was excess payment, and set aside the Commissioner's order.

2. The revenue contended that the appellant wrongly utilized the excess payment against the tenant's Service Tax, which was not permissible. However, the Tribunal observed no issue of wrong CENVAT Credit availment was raised in the show cause notice or adjudication order. The revenue's appeal was deemed unsustainable as it did not arise from the Order-In-Original. The Tribunal held that the revenue's appeal was based on incorrect assumptions and lacked merit, as the adjustment made by the appellant was lawful.

3. The Tribunal clarified that there was no case of wrong CENVAT Credit availment, as alleged by the revenue. The adjustment of excess Service Tax payment by the appellant was found to be in accordance with Rule 6(2) of Service Tax Rules. The Tribunal emphasized that the excess payment by either the appellant or the service recipient should be either refunded or adjusted against future tax liability. The Tribunal concluded that the adjustment made by the appellant was correct, and the revenue's appeal was based on erroneous grounds.

4. The Tribunal noted that the revenue's appeal before the Commissioner appeal was not maintainable, as it did not align with the issues raised in the Order-In-Original. Citing a Tribunal decision, the appellant argued against the maintainability of the revenue's appeal. The Tribunal found the revenue's appeal to be on a wrong footing and lacking legal basis, further supporting the appellant's position on the adjustment of excess Service Tax payment.

5. Considering the excess payment of Service Tax and the appellant's request for adjustment against future tax liability, the Tribunal upheld the validity of the adjustment. The Tribunal emphasized the need for either refunding the excess payment or allowing adjustment against future tax liability, as per Rule 6(2) of Service Tax Rules. Consequently, the Tribunal set aside the Commissioner appeal's decision, ruling in favor of the appellant and allowing the appeal with consequential relief.