2012 (9) TMI 772 - AT - Service Tax

Adjustments of excess payment of service tax - Rule 6(3) of the Service Tax Rules 1994 - General Insurance business - demand raised on ground that there was absence of clear material evidence to prove the fact that the service tax has been paid on total premium received inclusive of amounts refunded and that the amounts refunded have actually been received by the clients of the appellants - Held that - The whole rationale behind Rule 6 (3) is that where the service tax has been paid on amounts received for providing particular service and that service for some reason has not been provided by an assessee he can make adjustment of the excess tax paid in the succeeding period. That rationale would be defeated if the condition of refund is insisted to be satisfied only in a particular manner. The Rule itself does not provide for particular manner of refund and if it is a common industry practice to give refund by way of credits for any particular industry there would be no harm in allowing refund by adopting such widely accepted industry practice. What is required to be verified is that either by credit or by cheque the appellants have refunded the amounts for which they should make available their books of account/computerized records or statements as may be required by the adjudicating Commissioner. There should be co-operation between the department and the assessee to come to a fair conclusion as to whether the provision of Rule 6(3) has been satisfied. Matter remanded to the adjudicating Commissioner for fresh decision.

Summary

Issues:
Adjustments under Rule 6(3) of the Service Tax Rules, 1994 for two periods.

Analysis:
The dispute in the appeals revolves around adjustments made by the appellants under Rule 6(3) of the Service Tax Rules, 1994, for two periods. Rule 6(3) allows an assessee to adjust excess service tax paid if the taxable service on which service tax has been paid in the previous period was not provided. The appellants, engaged in the 'General Insurance' business, argue that they refund the value of service plus service tax in cases where the service is not provided due to subsequent cancellation of insurance policies. They maintain detailed accounts for such transactions, providing refunds through cheques for individuals and through credit entries for corporate clients. However, the adjudicating Commissioner did not have access to these details during the initial adjudication. The appellants request a waiver of pre-deposit and remand of the cases for verification of the details now provided to establish that refunds were made in compliance with Rule 6(3).

The Departmental Representative supports the impugned order, highlighting that the adjudicating Commissioner raised concerns regarding the absence of clear evidence showing actual refunds made by the appellants. The Commissioner questioned the verification of service tax paid on total premium received, inclusive of refunded amounts, and whether the refunded amounts were received by the appellants' clients. The Tribunal notes that the impugned orders were passed without transaction-wise details of service tax paid and refunded amounts, which have now been presented. It is crucial to verify that credits were actually provided to clients entitled to insurance premium and service tax refunds. The Tribunal acknowledges the industry practice of making refunds through book adjustments and credits, subject to verification. Insisting on refunds only by cash or cheques would defeat the rationale behind Rule 6(3). The Tribunal emphasizes the need for cooperation between the department and the assessee to ensure a fair conclusion on whether the conditions of Rule 6(3) have been met, including verifying the amount of adjustment made by the appellants and confirming that refunds were issued to clients not provided with the service.

In light of the above considerations, the Tribunal waives the requirement of pre-deposit in both cases, setting aside the impugned orders and remanding the matter to the adjudicating Commissioner for a fresh decision. Both appeals are allowed in terms of remand to facilitate a detailed examination of the refund process and compliance with Rule 6(3) by the appellants.