PAYMENT OF SERVICE TAX UNDER WRONG ACCOUNTING CODE

[DR.MARIAPPAN GOVINDARAJAN]

The Finance Act, 1994 and the rules made there under required a provider of taxable service to pay the service tax in the prescribed manner within the prescribed time.  The payment is to be made on or before 6^th of the following month and the payment is to be made electronically.  

Before the introduction of negative list regime, each service has been assigned a code under which the payment is to be made.  On the introduction of negative list regime only one code was allotted as –Services other than Negative list.   But this system did not long last since it was found difficult to ascertain tax collected service wise.  Therefore again the Department restored the payment of service under the respective service code. 

There is every possibility for any of the assessee to pay the tax in the wrong code inadvertently. What is the remedy available in such cases to the assessee?  The assessee was to pay the tax again under the correct code and he had to apply refund for the tax wrongly paid within the limitation period.   There was no remedy to transfer the amount paid under wrong code to the correct code.

If the assessee pays the service in the wrong accounting code he is not required to pay the service tax again as per Circular No. 58/07/2003, dated 20.05.2003.  In this circular  the Board gave clarification that the assessee need not be asked to pay the service tax again. In such cases the matter should be sorted with the P.A.O. As regards to the cases where the assessee was asked to pay service tax again, the amount thus paid may be refunded by the concerned divisional Asst. Commissioner/Deputy Commissioner.

Now the payment of service tax is made mandatorily through e-payment.  Again the problem survived against the payment of service tax in the wrong code.  The Principal Commissioner of Service Tax, Kolkata – I issued Trade Notice No. 14/2016.   In the said trade notice it has been indicated that a communication has been received by them from e-PAO, service tax, Mumbai that e-payment made by the assessee under wrong assessee code could not be regularized.

Rectification of mistake

However in the following cases, rectification of remittance is available with the Department-

1. Service tax has been paid in the wrong accounting code of a different service than which is rendered, where the mistake has occurred under same registration number;
2. Service tax has been paid against incorrect Accounting Minor Heads of Education Cess, interest, penalty, Secondary Higher Cess and or vice versa.For example – interest paid under Secondary Higher Education Cess etc.,;
3. Service tax has been paid against Central Excise Registration number of the assessee instead of service tax code number or vice versa (major heads – Customs – 037, Central Excise – 038 and Service Tax – 044)

What assessee to do?

 In such cases, the Trade notice indicates that in order to ensure uniformity and to avoid hardships to the assessee the following procedure is prescribed to be followed by the assessees and the field formations-

• Case 1 – the Assessee should represent through Range and Division to the Commissionerate of Central Excise and Service Tax, describing the mistake occurred/reasons for such errors along with the certified copies of the remittance challans, ST- 3 returns for the relevant period and any other document pertains to the issue to establish the genuine mistake and to ratify the error;
• Case 2 - the Assessee should represent through Range and Division to the Commissionerate of Central Excise and Service Tax, describing the mistake occurred/reasons for such errors along with the certified copies of the remittance challans, ST- 3 returns for the relevant period and any other document pertains to the issue to establish the genuine mistake and to ratify the error;
• Case 3 – The assessee should produce the certified copies of the relevant remittance challans of both Central Excise and Service Tax payments for that particular period for which rectification of errors is requested in addition to copies of service tax and central excise returns and any other documents in support of their claim.

What the department to do?

On receipt of the representation from the assessee seeking for ratification or rectification of wrong remittances made by him either in service or central excise, the Trade notice describe the procedure to be followed by the field formation which are detailed as below-

• The Department must ensure that the gross value and the services are correctly mentioned in the respective returns;
• The assessment regarding the actual payment of duties have been scrutinized;
• The authenticity of the remittance challans enclosed, along with proof of payment;
• The returns for the relevant periods are furnished incorporating the details of the payment challans mentioned for the corrections;
• Any other document furnished by the assessee or required to be verified by the Department in order to effect the rectifications.

The Range Officer should verify the same and give a certificate endorsing or recommending to the effect.  The said certificate should be attached with the representation of the assessee.  The representation will be forwarded to the e-PAO, Mumbai or e-PAO, Chennai respectively for service tax and central excise matters.   Before forwarding the representation necessary correction in the ledger maintained by the assessee at Commissionerate level should be made.

In case of request for changing major heads between Central Excise and Service Tax or vice versa, the matter may be taken up with the Principal Chief Commissioner of Accounts, CBEC, New Delhi.  As regards issues on rectification due to remittances in the wrong accounting codes, the matter may be taken up with the Controller of Accounts, New Delhi.

Discussions to this article

[Ganeshan Kalyani]

Very nice article and very informative. Thanks Sir.