2012 (7) TMI 706 - AT - Service Tax

Waiver of pre-deposit Refund of service tax by way of self adjustment under rule 6(4A) / 6(4B) - appellant paid service tax on value of cleaning service provided - later they realised that they need not have paid such service tax because recipient hospital was not a commercial establishment and therefore the service rendered to such establishments was not covered by entry at Section 65(24b). Therefore they adjusted the excess service tax paid Held that - Rule 4B as in force after 01-03-2007 clearly states that excess payment made on account of reasons involving interpretation of law, taxability, classification, value or applicability of any exemption notification shall not be allowed to be refunded by way of credit taken by the assessee on his own. In the present case the claim for refund has arisen on account of interpretation of law and therefore such refund cannot be claimed refund under Rule 6 (4A) as it existed at the relevant time or even later. Appellant directed to make deposit of 50% of the tax amount demanded as a pre-condition

Issues:
1. Whether an assessee can take suo moto credit of any service tax paid in a previous period by adjusting the same against future liability.
2. Whether excess payment made on account of reasons involving interpretation of law, taxability, classification, value, or applicability of any exemption notification can be refunded by way of credit taken by the assessee on his own.

Issue 1:
The Appellants, providing cleaning services under Section 62(24b) of Finance Act, 1994, rendered services to a hospital and realized they had paid excess service tax as the hospital was not a commercial establishment. They adjusted this excess amount against future liabilities. The Revenue contended that such adjustment was not permissible, proposing recovery through a Show Cause Notice. The Appellants argued that Rule 6(4A) of Service Tax Rules 1994 allowed for such adjustments. The Tribunal noted that Rule 6(4A) applied only to assessees with multiple premises, which did not include the Appellants. Additionally, Rule 6(4B) after 01-03-2007 specified conditions for adjusting excess payments, excluding cases involving interpretation of law. As the claim for refund arose due to interpretation of law, the Tribunal found no prima facie case in favor of the Appellants, directing a pre-deposit of 50% of the tax amount demanded for hearing the Appeal.

Issue 2:
The Commissioner (Appeals) had held that the cleaning service provided by the Appellants to the hospital was not taxable. The Appellants argued that since a finding in their favor was given, they should not be required to pay the demanded amount. The Revenue emphasized that the taxability of the service was not under consideration, with the main issue being the permissibility of an assessee taking suo moto credit by adjusting previous payments against future liabilities. The Revenue highlighted that no provision allowed for refund through such mechanisms, stressing the need for a formal refund application to prevent unjust enrichment. The Tribunal concurred, stating that excess payments due to interpretation of law could not be refunded through self-credit. Therefore, the Appellants were directed to make a pre-deposit for the Appeal, with a stay on collection during the pendency of the case.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, New Delhi, provides a comprehensive understanding of the issues involved and the Tribunal's decision on each issue, focusing on the permissibility of adjusting excess service tax payments against future liabilities and the limitations on such adjustments based on legal provisions and interpretations.

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