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2014 (7) TMI 625 - AT - Service TaxDemand of service tax - Suo moto adjustment of excess service tax paid for short paid service tax of subsequent year - Bar of limitation - Whether the adjustment made by the appellant on the excess payments made by them under the provisions of Rule 6 of the Service Tax Rules for payments of service tax, a liability that arose subsequently is sustainable - Held that - Decision in the case of CCE, New Delhi v. Sentinel Security (P) Ltd. - 2001 (8) TMI 3 - CEGAT, NEW DELHI and Oriental Insurance Co. Ltd. v. CCE, New Delhi - 2005 (2) TMI 1 - CESTAT (NEW DELHI) is on the point. - Adjustment of excess service paid allowed. Extended period of limitation - Held that - Service tax on reverse charge basis came into effect from 18.4.2006. Before this period no service tax on reverse charge can be demanded. Secondly, the unit was registered and department was aware of the nature of services being provided. The period of demand is from 2005 to March 2007 and the show cause notice is issued on 01.12.2008. As appellant was registered with the department and filing returns, extended period cannot be invoked in the present proceedings. The demand is thus also hit by limitation - Decided in favour of assessee.
Issues:
1. Adjustment of excess service tax paid for one financial year against the service tax liability for another financial year. 2. Applicability of reverse charge mechanism for service tax. 3. Time limitation for demanding service tax. Analysis: Issue 1: Adjustment of excess service tax paid for one financial year against the service tax liability for another financial year: The case involved a dispute regarding the adjustment of excess service tax paid by the appellant for the financial year 2005-06 against the service tax liability for the financial year 2006-07. The appellant contended that the excess amount paid in the previous year should be adjusted against the current year's liability. The Tribunal referred to Rule 6(3) of the Service Tax Rules, 1994, which allows the adjustment of excess service tax paid against the subsequent period's liability. The Tribunal also cited relevant case laws where similar adjustments were allowed, emphasizing that when there is no dispute regarding the extra payment, the adjustment should be regularized in the interest of justice. Consequently, the Tribunal allowed the adjustment of excess service tax paid for 2005-06 against the liability for 2006-07, leading to the appeal in favor of the appellant. Issue 2: Applicability of reverse charge mechanism for service tax: The appellant argued that they were not required to pay any service tax under the reverse charge mechanism before the relevant provision came into force. The Tribunal considered the applicability of Section 66A of the Finance Act, 1994, which introduced the reverse charge mechanism. The appellant's case was supported by the argument that the department was aware of their activities, making the demand time-barred. The Tribunal agreed with the appellant's contention, stating that the demand could not be enforced for the period before the reverse charge mechanism was in effect. Therefore, the Tribunal rejected the revenue's argument regarding the reverse charge mechanism's applicability in this case. Issue 3: Time limitation for demanding service tax: Regarding the time limitation for demanding service tax, the Tribunal noted that the period of demand was from 2005 to March 2007, with the show cause notice issued on 01.12.2008. The appellant was registered with the department and regularly filing returns, leading the Tribunal to conclude that the extended period could not be invoked in the present proceedings. As a result, the demand was considered time-barred, further supporting the appellant's case. Consequently, the Tribunal set aside the impugned Order-in-Appeal and allowed the appeal filed by the appellant. In conclusion, the Tribunal ruled in favor of the appellant, allowing the adjustment of excess service tax paid for one financial year against the liability for another year, rejecting the revenue's argument on the reverse charge mechanism's applicability, and holding the demand for service tax as time-barred.
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