2009 (9) TMI 275 - AT - Service Tax

Payment of service tax- whether there is no provision for adjustment of short payment of service tax of earlier period against excess payment of tax in subsequent period? Held that there is no provision for adjustment for short payment of tax for earlier period excess amount against the subsequent period. The assessee paid service tax of excess amount against the taxable services which could not be treated as mere deposit, thus, such adjustment was contrary to the provisions of rule 6(3). Hence, demand of tax on that issue was justified. - whether since service tax is levied on goods transport agency s service and transporter had already paid tax on same, demand of tax again on same was not sustainable. Held yes and drop the penalties.

Summary

The Appellate Tribunal CESTAT, New Delhi, in the case of P.K. Das, Judicial Member, reviewed an appeal concerning two main issues. The first issue was whether excess service tax payments during June and August 2005 could be offset against earlier short payments from January to May 2005. The second issue was whether the service tax paid by the transporter should be paid by the appellants. The appellants were found to have made short payments of tax in the earlier period and excess payments in the subsequent period. The excess payment was adjusted against the short payment, which the Commissioner revised, leading to a demand for duty and penalties.

The Chartered Accountant representing the appellants argued that the excess payment should be adjusted against the short payment, and that the demand against the short payment without such adjustment was not valid. He also contended that the demand for tax on the same service again amounted to double taxation. The SDR for the Revenue argued that the appellants were liable to pay tax under the Finance Act, 1994, and that the tax liability could not be shifted to the transporter.

The Judicial Member found that the adjustment of excess service tax against the subsequent period was permissible only if the value of taxable service and the service tax thereon were refunded to the person from whom it was received, as per the provisions of rule 6(3) of the Service Tax Rules, 1994. The excess amount paid could not be treated as a mere deposit and was contrary to the rules. However, the demand of tax to the extent of payment of service tax by the transporter was set aside, as the transporter had already paid the tax on the service.

In conclusion, the demand of tax for the short payment was upheld to the extent of adjustment, while the demand of tax for the service tax paid by the transporter was set aside. Penalties were also set aside as the issue involved interpretation of the law. The appeal was disposed of accordingly.