2024 (12) TMI 468 - AT - Service Tax

Adjustment of service tax paid on services provided to various State Government entities - Territorial Jurisdiction - exemption from service tax - in the present case the services are provided in Gujarat - contention of the revenue is that the exemption to the services provided to consulate of Belgium is limited to their premises in New Delhi and Mumbai - time limitation. Adjustment of service tax paid on services provided to various State Government entities - HELD THAT - Perusal of Rule 6(3) of the Service Tax Rules, 1994 would reveal that it is very wide in nature where the adjustment of service tax is permissible subject to certain conditions. It is undisputed fact in the present case that the Appellant has issued the credit notes to those government entities which refused the payment of consideration and service tax to the Appellants. Therefore, the Appellant has rightly issued the credit notes to those government entities and adjusted the service tax already paid by them. Support drawn from a recent decision of coordinate bench of this Tribunal at Allahabad in case of VC Solutions Pvt. Ltd. 2024 (4) TMI 112 - CESTAT ALLAHABAD wherein it is observed as ' From perusal of the above Rule, 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.' Thus, the demand of Service tax of Rs.38,74,883/- is not sustainable in the present case. Exemption from payment of service tax for the services provided to Consulate of Belgium - Time limitation - HELD THAT - The entire issue in the present case has come up through the audit of the assessee by the revenue authorities. The Appellant has also broadly contested the demand on limitation - the Appellant has established a strong case on limitation. The Appellant claimed the exemption from payment of service tax itself is an indication that there was no suppression on the part of the Appellant. The impugned order is set aside - appeal allowed.

Issues Involved:

1. Exemption from service tax for services provided to the Consulate of Belgium.
2. Adjustment of service tax paid on services provided to various State Government entities.

Issue 1: Exemption from Service Tax for Services Provided to the Consulate of Belgium

The primary issue revolves around whether the services provided by the Appellant to the Consulate of Belgium, for an exhibition in Vibrant Gujarat, qualify for service tax exemption. The revenue's contention is that the exemption is limited to services provided at the consulate's premises in New Delhi and Mumbai. Since the services were provided in Gujarat, the exemption was deemed inapplicable, resulting in a confirmed demand of service tax amounting to Rs.1,60,680/-.

Upon review, the Tribunal found that the demand arose from an audit conducted by the revenue authorities. The Appellant contested the demand on the grounds of limitation, arguing that claiming exemption itself indicates no suppression of facts. The Tribunal referred to a detailed analysis by the Principal Bench at New Delhi, which emphasized that invoking the extended period of limitation requires establishing intent, such as fraud or suppression of facts. The Tribunal concluded that the Appellant had a strong case on limitation, as there was no deliberate suppression of facts. Consequently, the demand for service tax on this issue was set aside.

Issue 2: Adjustment of Service Tax Paid on Services Provided to Various State Government Entities

The second issue concerns the adjustment of service tax paid by the Appellant on services provided to various State Government entities during the Vibrant Gujarat Summit 2013. The Appellant issued invoices charging service tax, but upon non-payment by the government entities, credit notes were issued, and the service tax paid was adjusted against other liabilities. The revenue confirmed a demand of Rs.38,74,883/- on the grounds that the Appellant should not have adjusted the service tax paid.

The Tribunal examined Rule 6(3) of the Service Tax Rules, 1994, which allows for the adjustment of service tax if the service is not provided or if the invoice amount is renegotiated. The Tribunal noted that the rule is broad and permits adjustments under certain conditions, such as issuing credit notes when services are not provided. The Tribunal found that the Appellant had rightfully issued credit notes and adjusted the service tax, aligning with precedents set by various Tribunal decisions, including those of the Allahabad and Delhi benches. These decisions affirmed the permissibility of adjusting excess service tax paid under similar circumstances. Consequently, the Tribunal found the demand of Rs.38,74,883/- unsustainable and set it aside.

In conclusion, the Tribunal allowed the appeal filed by the Appellant, setting aside the impugned order and granting consequential relief. The judgment underscores the importance of adhering to statutory provisions and established judicial precedents in determining service tax liabilities and adjustments.

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