2018 (1) TMI 170 - AT - Service Tax

Banking and other Financial Services - profits earned on Foreign Exchange remuneration - whether the profit earned by the appellant on Foreign Exchange remuneration is a taxable service or not? - Held that - The taxability of the same stands considered by the adjudicating authority in the adjudication, relatable to the refund claim filed by the appellant and the same stands upheld by the adjudicating authority and having not been appealed against holds the field - It may not be out of place once again to mention that the provision of Rule 6 (3) of STR, 1994, do not relate to dispute on the taxability and simplicitor allow the credit of the service tax already paid in respect of the services which are subsequently not provided by an assessee. The assessee s refund claim filed under Section 11 B of Central Excise Act, 1944, having been rejected and not challenged the appellant s claim of suo motto credit involved in the present appeal cannot be accepted - appeal dismissed.

Summary

Issues:
1. Refund claim of service tax paid on Foreign Exchange remuneration.
2. Applicability of Rule 6(3) of Service Tax Rules, 1994 for crediting service tax.

Analysis:
1. The appellant, a service provider under Banking and Financial Services, paid service tax on profits from Foreign Exchange remuneration following an audit objection. Subsequently, a refund claim was filed for the tax paid, which was rejected by the original adjudicating authority on both merits and limitation grounds. The appellant did not challenge this order, allowing it to attain finality. The appellant then suo moto credited the tax paid, leading to proceedings against them. The present appeal challenges the denial of this credit, contending it was in accordance with Rule 6(3) of the Service Tax Rules, 1994.

2. The appellant's defense hinges on Rule 6(3) of the Service Tax Rules, 1994, which allows an assessee to adjust excess service tax paid if the taxable service was not provided. However, the Tribunal noted that this rule pertains to taxable services and does not address the taxability of the service itself. Since the taxability of the Foreign Exchange remuneration had been upheld in the previous adjudication, and the refund claim was rejected, the Tribunal deemed the appellant's suo moto credit invalid. The Tribunal emphasized that Rule 6(3) does not apply to disputes on taxability but allows credit for services not provided after tax payment.

3. Ultimately, the Tribunal upheld the impugned orders, stating that since the appellant's refund claim was rejected and not challenged, their claim for suo moto credit could not be accepted. The decision was based on the understanding that Rule 6(3) does not cover situations where the taxability of the service is in dispute. Therefore, the appeal was dismissed, affirming the denial of the appellant's credit for the tax paid on Foreign Exchange remuneration.