2016 (6) TMI 675 - AT - Service Tax

Suo-Moto adjustment of excess service tax paid with the subsequent liability without adhering to provisions of Rule 6(4A) and 6(4B) of Service Tax Rules, 1994 - The department entertained the view that as the respondents adjusted the excess amount suo-motto, without intimating department and in violation of above said Rules, the respondents have short paid service tax to that extent. Held that - The assessee is given a option to adjust the excess paid amount to future liability of service tax by the said rules. The assessee can also opt to claim refund of excess paid amount. In that case, the assessee will be eligible for interest also. When the assessee opts for adjustment so as to eliminate the hassles of refund by foregoing the interest, strict interpretation and denying adjustment would result in unjust enrichment of the Revenue which can never be the intention of the Rule. Rule 6(1A) does not impose any restriction - Demand set aside - Decided in favor of assessee.

Issues:
1. Challenge to setting aside demand of service tax interest and penalty due to excess payment adjustment without department intimation.
2. Interpretation of Rule 6(4A) and 6(4B) of Service Tax Rules, 1994 regarding excess payment adjustment.
3. Dispute over adjustment procedure for excess paid service tax.
4. Application of Rule 6(1A) and Rule 6(3) in the case.
5. Condonation of technical breach regarding department intimation for adjustment.
6. Judicial interpretation of rules and previous judgments on adjustment of excess paid service tax.

Issue 1:
The appeal was filed by Revenue challenging the Commissioner (Appeals) order setting aside the demand of service tax interest and penalty due to excess payment adjustment without department intimation. The Revenue claimed that the adjustment was made without adhering to provisions of Rule 6(4A) and 6(4B) of Service Tax Rules, 1994, resulting in short payment of service tax.

Issue 2:
The dispute revolved around the interpretation of Rule 6(4A) and 6(4B) of Service Tax Rules, 1994 regarding the limit of one lakh rupees per month for adjustment of excess paid service tax. The Revenue contended that the respondents exceeded this limit while making adjustments without intimating the department, leading to the demand for the short payment of service tax.

Issue 3:
The argument presented by the Revenue was that the respondents failed to adhere to the procedure for adjustment of excess paid service tax as per Rule 6(4A) and 6(4B). The original authority confirmed the demand, interest, and penalty, emphasizing the violation of rules by the respondents in adjusting the excess amount without department intimation.

Issue 4:
The application of Rule 6(1A) and Rule 6(3) was crucial in determining the validity of the adjustment made by the respondents. The Commissioner (Appeals) highlighted that Rule 6(1A) allows for the adjustment of excess paid service tax against liability for subsequent periods, while Rule 6(3) also provides for such adjustments. The judgment referred to previous cases to support the interpretation of these rules.

Issue 5:
The Commissioner (Appeals) condoned the failure to intimate the department about the adjustment as a technical breach, which the Revenue argued was a significant violation leading to short payment of service tax. The argument focused on whether the failure to intimate the department should be considered a mere technical lapse or a substantial non-compliance.

Issue 6:
The judgment extensively discussed the judicial interpretations of rules and previous judgments related to the adjustment of excess paid service tax. Various cases were cited to support the view that strict interpretation denying adjustment would result in unjust enrichment of the Revenue, emphasizing the intention behind the rules and the importance of allowing the adjustment to avoid complications related to refunds.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments presented by both parties and the reasoning behind the decision.

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