2016 (9) TMI 327 - HC - Service Tax

Demand of service tax with interest - Adjustment of excess service tax paid of previous month with the subsequent months Rule 6(3) of the Service Tax Rules, 1994 whether suo moto adjustment of excess paid Service Tax in the subsequent months can be made, when there is a separate procedure to claim refund of the excess paid taxes under Section 11B of the Central Excise Act 1944? Held that - the respondent-BSNL ought to have applied for refund of service tax paid in excess for certain months, in terms of Section 83 of the Finance Act, 1994, read with Section 11B of the Central Excise Act, 1944 and they cannot suo-motu adjust the excess payment of service tax, for certain months against the Service Tax, due to be paid for the subsequent period, in terms of Rule 6(3) of the Service Tax Rules, 1994 matter remanded to the original adjudicating authority with a direction to consider the applicability of Rule 6(3) of the Service Tax Rules, to the facts of these cases and record a finding, as to whether, the assessee can suo-motu adjust the tax or entitled to refund of the excess payment of service tax, during the relevant period matter to be decided by original adjudicating authority within a period of eight weeks, from the date of receipt of a copy of this order CMA disposed off.

Summary

Issues:
1. Adjustment of excess service tax paid against subsequent tax liability.
2. Applicability of Rule 6(3) of the Service Tax Rules, 1994.

Issue 1: Adjustment of excess service tax paid against subsequent tax liability

The case involved the Commissioner of Central Excise, Puducherry Commissionerate, filing a Civil Miscellaneous Appeal against the Final Order Nos.545 and 546 of 2010 issued by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Chennai. The respondent, M/s.Bharat Sanchar Nigam Ltd (BSNL), was accused of adjusting the service tax paid in excess during the period from November 2000 to May 2002 against the service tax liability for subsequent months, contrary to the provisions of Rule 6(3) of the Service Tax Rules, 1994. The Adjudicating Authority confirmed the demand of service tax amounting to &8377;46.55 Lakhs along with interest. However, the appellate authority allowed BSNL's appeal, stating that the excess and short payments had been adjusted by the Jurisdictional officer and that BSNL was making payments tentatively due to the difficulty in determining the exact amount. The Tribunal upheld the appellate authority's decision, leading to the Commissioner filing the instant Civil Miscellaneous Appeal.

Issue 2: Applicability of Rule 6(3) of the Service Tax Rules, 1994

The main contention revolved around the interpretation of Rule 6(3) of the Service Tax Rules, 1994. The appellant argued that BSNL's adjustment of excess service tax paid against subsequent tax liability was not authorized by law. The appellant contended that BSNL should have followed the procedure prescribed under sub-rule (4) & (5) of Rule 6 and that the provision relating to provisional assessment prescribed under Rule 7 of the Central Excise Rules, 2002 should apply. The appellant emphasized that BSNL did not request nor receive permission for provisional payment of service tax as per Rule 6(4) of the Service Tax Rules, 1994. It was argued that BSNL should have applied for a refund of the excess service tax paid for certain months under Section 83 of the Finance Act, 1994, read with Section 11B of the Central Excise Act, 1994, instead of adjusting it against subsequent tax liability. The appellant also challenged the reliance on certain Board Circulars and highlighted the importance of following the correct procedures for payment and adjustment of service tax.

In the judgment, the High Court of Madras directed a remand of the matter to the original adjudicating authority to consider the applicability of Rule 6(3) of the Service Tax Rules to the facts of the case. The court emphasized the need for a proper assessment of whether the assessee can adjust the tax suo-motu or is entitled to a refund of the excess payment of service tax made during the relevant period. The adjudicating authority was instructed to conduct the proceedings within eight weeks from the date of receipt of the order. The Civil Miscellaneous Appeals were disposed of without any costs being imposed.