2010 (5) TMI 143 - AT - Service Tax

Telecommunication Services- The respondents provide telephone services. Earlier, they were part of Department of Telecommunication and in November, 2000, they became a corporate entity. The department has demanded service tax only taking into account the shortages. Held that- the view taken by the lower appellate authority that the authorities concerned should compute the interest liability on a cumulative basis at the end of 6 month period adjusting the excess payment against short-payment is reasonable and the same requires no interference. Accordingly, the appeals filed by the department are rejected.

Summary

Issues: Calculation of service tax liability, adjustment of excess and shortage amounts, filing of refund claims.

Analysis:

1. Calculation of Service Tax Liability:
The case involved a dispute regarding the calculation of service tax liability by the respondents who provided telephone services. The period under consideration was from November 2000 to May 2002. The respondents had paid varying amounts of service tax each month, some exceeding the due amount and some falling short. The contention was that service tax returns were to be filed semi-annually, and assessments were to be conducted accordingly. The department demanded service tax based only on the shortages, while the excess amounts paid were not considered for adjustment in the calculation.

2. Adjustment of Excess and Shortage Amounts:
The lower appellate authority held that since the respondents were required to file half-yearly returns, the interest liability on service tax should be computed on a cumulative basis at the end of the 6-month period. The excess payments made in certain months were to be adjusted against the short payments to determine the final liability. The authority rejected the department's argument that separate refund claims should have been filed for the excess amounts paid, affirming that adjustments should be made at the end of the specified period.

3. Filing of Refund Claims:
The department's position that separate refund claims should have been submitted for the excess amounts paid by the respondents was not accepted. The tribunal upheld the view that adjustments between excess and short payments should be made at the end of the 6-month period in line with the semi-annual filing requirements. Consequently, the appeals filed by the department were dismissed, affirming the lower authority's decision on the calculation and adjustment of service tax liabilities.

In conclusion, the tribunal's judgment clarified the methodology for computing service tax liabilities for the respondents providing telephone services, emphasizing the importance of adjusting excess and shortage amounts at the end of the prescribed period rather than through separate refund claims.