SERVICE TAX IF COLLECTED TO BE DEPOSITED

[Dr. Sanjiv Agarwal]

Section 73A was inserted in the Finance Act, 1994 by Finance Act, 2006 w.e.f. 18.04.2006. It provides that Service Tax collected from any person shall be deposited with the Central Government. Accordingly any person who has collected any amount in excess of Service Tax assessed or determined and paid on any taxable service from recipient of Service Tax in any manner as representing Service Tax, shall forthwith pay the amount so collected to the credit of the Central Government.

Service Tax Collected to be Deposited with Government (Section 73A)

The provisions of section 73A shall be applicable only when any excess amount has been collected as service tax from the service recipient. If such amount of service tax is collected which is in excess of service tax assessed or determined or paid on any taxable service, such amount is required to be deposited forthwith to the credit of the Central Government. ‘Collection’ precedes ‘payment’. Thus, if no amount of service tax is collected, section 73A is not applicable. Further, such amount should be in excess of service tax determined or assessed.

Meaning of ‘Forthwith’

The literal meaning of ‘forthwith’ is immediately or without delay; as soon as reasonably can be, without unreasonable delay etc.

Advanced Law Lexicon by P Ramanatha Aiyer provides the following interpretation / meaning of the word ‘forthwith’ –

The dictionary meaning of ‘forthwith’ is “immediately, at once, without delay or interval.” A typical instance of the use of the word cited in the dictionary is : “When a defendant is ordered to plead forthwith, he must plead within twenty-four hours.” (Sk. Salim v. The State of West Bengal, 1975 (1) TMI 90 - Supreme Court of India). [See Shorter Oxford English Dictionary, Third Edition, Vol. I, p. 740]. The Interpretation of Statutes 12th Ed., pp. 10 I-I 02].

Where, however, the statute prescribes the payment of money and the accrual of interest thereon at certain points of time, the expression ‘forthwith’ must necessarily be understood to be immediate or instantaneous. so as to avoid any ambiguity or uncertainty. The right accrues or liability arises exactly as prescribed by the statute. [Raymond Synthetics Ltd. v. Union of India, 1992 (2) TMI 269 - SUPREME COURT OF INDIA]. It means with all reasonable quickness and reasonable prompt time. [Rao Mahmood Ahmed Khan v. Ranbir Singh. 1995 (2) TMI 359 - SUPREME COURT].

However, the word ‘forthwith’ should not be construed as to mean “then & there” but means within reasonable time.” (Basant Raj v. State, 1994 CrLR Raj 410).

There are a few cases in which “forthwith” has been held to be synonymous with ‘immediately’ but these are in contexts such as the performance of judicial actions where reasonably practicable would probably amount to the same thing in practice. See for example : R. v Francis, Ca t. Hard 115; Grace v. Clinch, 4 QB 606; R. v. Berkshire Justices 4 QBD 469.

[Occasionally the word “forthwith” means as soon as possible after the occurrence of some specific intervening event expressed or implied from the context. For example, the making of an application (Hancock v. Somes. 28 LJMC 196; Costa v. Hetherington. 28 LlMC 198) or the execution of a reconveyance (Boyes v. Bluck; 13 CB 652)]. (Stroud. 6th Edn. 2000)

The word “forthwith” must receive a reasonable construction, and in giving it a construction some regard must be had to the nature of the act or thing to be performed and the circumstances of the case.

The term ‘forthwith’ means within a reasonable time [Samsnath v. Bhagwat Nath, AIR 1966 All 615, 616. [C.P.C. (5 of 1908), O. XVll, R. 3(a) as amended by Allahabad High Court]

The word ‘forthwith’ cannot be taken to mean a mandate to decide the suit the same day

as a penalty for default. Kurilal Rungta v. Banarsi Devi, 1985 (5) TMI 241 - ALLAHABAD HIGH COURT 104. [C.P.C. (5 of 1908), O. XVII, R. 3(a)]

Forthwith means immediately or without delay. Kamaxi Kom Bhikku Shetty v. Vaman hippayya Bhattageri, AIR 1976 Kant 3, 4. [C.P.c. (5 of 1908), O. XXI, R. 84(1)] Maxwell in Interpretation of Statutes (II th Edition) at p. 341 observes as follows:-

When a statute requires that something shall be done ‘forthwith’, it should be probably understood as allowing a reasonable time for doing it. [Bidya Deb Barma etc. v. District Magistrate. Tripura, Agartala, 1968 (8) TMI 187 - Supreme Court of India at ) 325. - Preventive Detention Act (1950), S. 3(3)].

An Act which is to be done forthwith must be held to have been so done, when it is done with all reasonable despatch and without avoidable delay. The term ‘forthwith’ in S.3(3) cannot mean the same thing as ‘as soon as may be’ in S. 7, and the farmer is more peremptory than the latter. [Kesha Nilkanth Joglakar v. The Commissioner of Police, 1956 (9) TMI 56 - Supreme Court of India, 3 I, 32.-Preventive Detention Act, 1950, Ss. (3) and 7].

When does section 73A come into play

Section 73A can be invoked when –

(i) Assessee has collected service tax from the service recipient or service tax has been collected which is not required to be so collected

(ii) Such service tax has been collected in excess of service tax assessed or determined and paid

(iii) Service tax having been collected has not been paid as provided in law.

Under sub-section (3), if the amount collected is not paid as required under sub-sections (1) or (2), Central Excise Officer shall serve a show cause notice on the person liable to pay service tax seeking show cause as to why the amount as specified in the show cause notice shall not be paid by him to the credit of the Central Government.

Once the SCN is issued to person liable to pay service tax, Central Excise Officer shall consider the representation or reply to SCN and determine the amount to be paid by him which shall not be more than the amount specified in the SCN. The person liable shall pay the amount so determined.

In terms of sub-sections (5) and (6) of the said provision, amount paid by such person shall be adjusted as follows –

(i) Against service tax payable by the person on finalization of assessment or any other proceeding for determination of service tax relating to taxable services.

(ii) Surplus, if any after afore mentioned adjustment shall be dealt with

(a) by way of credit to Consumer Welfare Fund under section 12C of Central Excise Act, 1944, or

(b) refunded to person who had borne the incidence of such amount as per section 11B of Central Excise Act, 1944.

For refund, application u/s 11B of the Central Excise Act, 1944 shall be made within six months from the date of public notice issued by Central Excise Officer for refund of any surplus amount

In Alstom Projects India Ltd. v. CC, CE & ST Coimbatore 2013 (6) TMI 202 - CESTAT CHENNAI, where assessee had paid Service Tax under protest on services exported by it and claimed that though they were not liable to pay Service Tax and that if they are made liable to pay Service Tax, sums received should be treated as cum tax; and where department argued that since assessee had admitted that amounts were cum-tax, such sum was payable by assessee u/s 73A, it was held that since Service Tax was paid under protest and invoices showed that assessee had not collected any Service Tax from his foreign clients, assessee was entitled for refund of entire Service Tax paid. Assessee’s alternative plea to treat amount as cum-tax was valid only if services provided were held liable to Service Tax, which is not the case as alternative plea did not survive due to main plea decided in assessee’s favour. So far as section 73A is concerned, it applies when a person collects any sum in name of service tax, which could not have been done by a person claiming all through that he is not liable to pay Service Tax.

In CCE v. Standard Niwar Mill 2013 (8) TMI 269 - ALLAHABAD HIGH COURT, it was held that Service tax collected from any person to be deposited with Central Government. A person who has collected any amount in excess of duty/tax assessed or determined and paid, has to pay such excess amount so collected to credit of Central Government. Expression “duty/tax assessed or determined and paid” presupposes determination or assessment of duty/ tax; only thereafter, question of excess collection would arise. In other words, assessment or determination is sine qua non to hold a person liable under section 73A. Even if there is no assessment order of any kind by proper officer, self assessment made by assessee would be ‘assessment’ for purposes of this section.

No demand for recovery could be made by invoking section 73A, as it applies only to excess duty. While liability to pay duty/tax is there, but, recovery/adjudication is barred by time; hence, section 73A, being machinery provision for payment/realization of excess duty collected, cannot be pressed into service. Section 73A can be invoked in aid of main provision i.e. section 73, but note vice versa. Hence, no sum could be demanded from assessee. In this case, assessee had collected duty/tax to the extent actually payable and he had made self-assessment, therefore, such sum was payable under section 73 and section 73A was inapplicable, as there was no collection in excess of that self-assessed.

In Neel Sidhi Enterprises v. CST, Mumbai – 2013 (8) TMI 674 - CESTAT MUMBAI, it was held that Section 73A envisages two things - amount is not required to be collected and amount is collected as representing service tax. In this case, DGST Circular provided that service tax was payable, therefore, assessee cannot be blamed for believing that amount was required to be collected. Further, amount was collected as ‘contingent liability’ and not as service tax per se and such amount was refundable with interest and was actually refunded with interest. Therefore, in these circumstances, provisions of Section 73A were held to be not attracted at all.

In CCE, Puducherry Commissionarate v. CESTAT 2014 (1) TMI 459 - MADRAS HIGH COURT, it was

held that section 73A of the Act was introduced by Finance Act, 2006, with effect from 18.04.2006, to specify some situations where service tax is payable by a person, and to provide for recovery procedure in respect of such amount due. In terms of sub-section (1) of section 73A, any person who is liable to pay service tax and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service from the recipient of taxable service, shall forthwith pay the amount so collected, to the credit of the Central Government. Likewise in terms of sub-section (2) where any person who has collected any amount which is not required to be collected in any manner as representing service tax, shall forthwith pay the amount to the credit of the Central Government. Sub-section (3) deals with the power of the Central Excise Officer to issue a show-cause notice for non-compliance of provisions of sub-section (1) or sub-section (2) of Section 73A of the Act. On receiving a reply to such show-cause notice, the Central Excise Officer, shall determine the amount in terms of sub-section (4)of Section 73A. Sub-section (5) of Section 73A, provides for adjustment of the amounts paid under sub-section (1) or sub-section (2) or sub-section (4) against the service tax payable by the person on finalisation of assessment. Upon such adjustment, if there is any surplus amount left, the same shall in accordance with sub-section (6) of Section 73A, be credited to the consumer welfare fund referred to in section 12C of the Central Excise Act, 1944, or refunded to the person who has borne the incidence of such amount in accordance with section 11B of the Central Excise Act, 1944 and such person is entitled to make an Application for refund within six months from the date of Public Notice. So far as cases filed under section 73A of the Act are concerned and as governed by sub-section 6 of Section 73 of the Act, the dates on which service tax is to be paid under the said chapter or Rules made therein shall be the relevant date for the purpose of Section 73(1) of the Act.

In Jaipuria Infrastructure Developers (P.) Ltd. v. CST, Delhi 2014 (4) TMI 443 - CESTAT NEW DELHI, where Service Tax collected by builders from buyers was deposited with Revenue by contractor being job worker for builders, it was held that the revenue could not be allowed to receive service tax again in respect of same construction activities from buyer by taking resort to section 73A.

In CCE & ST, Ludhiana v. Ajay Kumar Gupta 2014 (9) TMI 649 - CESTAT NEW DELHI, it was held that charging of Service Tax by assessee and retaining the same with him instead of paying the same to revenue is an act of wilful suppression of facts with an intent to evade payment of Service Tax and establishes assessee’s mala fides.