2016 (1) TMI 924 - AT - Service Tax

Self adjustment of excess service tax paid towards payment of service tax during the subsequent period - appellants had not intimated the said adjustment to the department - Rules 6(4A) and 6(4B) of the Service Tax Rules, 1994 - Held that - there is no dispute about the fact that appellants have paid excess service tax amount of ₹ 2,49,858/- in May 2010. The dispute revolves around the procedure they have followed in adjusting the said excess amount against the future service tax liabilities in June, July and August 2010 suo-moto. We find force in the arguments of the learned Senior Adviser of the appellants that infringement of the procedure is not serious enough to impose equivalent penalty of ₹ 2,49,858/- under Section 78 in the instant case. It is so especially, since in reality there is no short payment of service tax of ₹ 2,49,858/- in the instant case, and it is a question about adjustment of excess service tax paid which has been adjusted suo-moto against the subsequent service tax liability. Demand of duty and penalty set aside - levy of penalty of ₹ 5,000/- u/s 77 upheld - Decided in favor of assessee.

Summary

Issues:
1. Excess payment of service tax and adjustment without intimation to the department.
2. Applicability of Rules 6(4A) and 6(4B) of the Service Tax Rules, 1994.
3. Imposition of penalties under Section 77 and Section 78 of the Finance Act, 1994.
4. Dispute regarding adjustment procedure and imposition of equivalent penalty.

Analysis:
The case involved the appellant, M/s. L&T Sargent & Lundy Limited, making an excess payment of service tax of Rs. 2,49,858 in May 2010, which they subsequently adjusted towards service tax liabilities in June, July, and August 2010 without intimating the department. The Revenue contended that this adjustment was not permissible under Rules 6(4A) and 6(4B) of the Service Tax Rules, 1994, leading to the demand of service tax, interest, and penalties under Section 77 and Section 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld the demand and penalties, albeit reducing the penalty under Section 77. The appellants challenged this decision before the Appellate Tribunal CESTAT AHMEDABAD.

During the hearing, the appellant's Senior Adviser argued that there was no intention to evade payment, and the excess amount was eligible for adjustment against future tax liabilities. He contended that the adjustment did not require intimation to the department under Rule 6(3) and that the penalty under Section 78 was unwarranted for a minor procedural defect. On the other hand, the Authorised Representative emphasized the appellant's awareness of procedures and advocated for the imposition of penalties.

Upon careful consideration, the Tribunal found that while the appellant had indeed paid excess service tax, the issue centered on the adjustment procedure followed. The Tribunal agreed with the appellant's argument that the procedural infringement did not merit the equivalent penalty under Section 78, especially since there was no actual short payment of service tax. Consequently, the Tribunal directed the lower authorities to regularize the excess amount paid against the subsequent service tax liability and set aside the demand of service tax, interest, and penalty under Section 78. However, the penalty under Section 77 was upheld at Rs. 5,000 as per the Order-in-Appeal.

In conclusion, the Tribunal allowed the appeal on the terms mentioned, emphasizing the regularizing of the excess service tax paid and setting aside the demand and penalties under Section 78 while upholding the penalty under Section 77.