2005 (10) TMI 4 - AT - Service Tax

(i) Adjustment of service tax against subsequent liability and (ii) imposition of penalty under section 76 & 77

Summary

Issues:
Challenge to order-in-appeal dated 28-5-2004, imposition of service tax on Architects, adjustment of short payment against excess payment, penalty under different sections.

Analysis:
The appellants, registered under Service Tax provisions as Architects, challenged the order-in-appeal dated 28-5-2004. The dispute arose due to the imposition of service tax on Architects, leading to non-filing of proper returns and default in depositing the Service Tax. The adjudicating authority confirmed the demand and imposed penalties under various Sections. On appeal, the Commissioner (Appeals) reduced the penalty to the amount of Service Tax payable but upheld other penalties. The appellants claimed to have adjusted the short payment against the excess payment for a previous period, citing Rule 6(3) of the Service Tax Rules. They also argued that they had deposited all service tax and interest by a certain date. The appellants relied on a judgment of the Hon'ble Mumbai High Court and a decision of the Tribunal to support their case.

The learned advocate for the appellants contended that the adjustment of short payment against excess payment was permissible under Rule 6(3) of the Service Tax Rules. The learned DR, however, argued that such adjustment is only allowed if the amount is returned to customers. The Tribunal examined the provisions of Rule 6(3) and emphasized that the law allows for the adjustment of excess payment against short payment, preventing hurdles in tax collection. The Tribunal criticized a narrow interpretation that would render the provision ineffective. Accordingly, the Tribunal found the appellants' request for adjustment to be fair and within the law.

Regarding the penalty, the Tribunal held that the judgment of the Hon'ble Mumbai High Court, which waived penalties in similar cases, was binding. Therefore, no penalty could be imposed on the appellants. In conclusion, the Tribunal allowed the appeal, setting aside the impugned order. The operative part of the order was pronounced in open court on 25-10-2005.