2019 (3) TMI 1333 - AT - Service Tax

Adjustment of duty paid in subsequent period - imposition of penalty for delaying in payment - short payment of service tax - Held that - The appellant has shown their liability of service tax in ST-3 Returns and also shown that how much service tax they have paid. This fact of knowledge of the department at the time of service tax returns, in these circumstances, malafide cannot be attributable against the appellant. Therefore, no penalty is imposable on the appellant for delaying payment made by the appellant - The fact of short payment of service tax in the knowledge of the department itself, therefore, show cause notice issued to the appellant is barred by limitation. Therefore, penalty imposed on the appellant is set-aside. Adjustment of excess service tax - Held that - Admittedly, for the period April 2010 to Sept. 2010 the appellant filed service tax returns on 25.10.2010. In the said return, although the appellant paid short payment of service tax, but, also failed to mention the amount of adjustment if same is taken into account the differential amount of service tax which is none other than is only adjustment of excess of service tax. In that circumstances, merely non mentioning the adjustment of excess payment of service tax in the ST-3 Return shall not be fatal - the appellant is entitled to adjustment of excess payment of service tax paid by them during the period 2009-2010 - demand of service tax is set-aside. Appeal allowed in toto.

Summary

Issues:
1. Whether penalty can be imposed for delaying payment of service tax?
2. Whether adjustment of excess service tax can be allowed to the appellant?

Analysis:

Issue 1:
The appellant appealed against an order disallowing the adjustment of duty paid in a subsequent period and imposing a penalty for delayed payment of service tax. The appellant, a Public Sector undertaking providing 'Telecom Services,' had initially short-paid service tax for 2008-2009, which was later rectified upon being pointed out by the Audit team. However, for 2009-2010, the appellant had overpaid service tax, which was adjusted but not reflected in the ST-3 Returns filed. The issue revolved around whether penalty could be imposed for the delayed payment of service tax. The appellant argued that there was no malafide intention, as they had disclosed the short payment and rectified it promptly. The Tribunal held that since the department was aware of the short payment through the service tax returns, no penalty could be imposed on the appellant for the delay. The show cause notice issued was considered time-barred, and the penalty was set aside, with the appellant directed to pay the differential service tax with interest for the intervening period.

Issue 2:
The second issue concerned whether the adjustment of excess service tax could be allowed to the appellant. Despite the appellant's failure to mention the adjustment in the ST-3 Returns for the period April 2010 to September 2010, the Tribunal ruled that this procedural lapse should not deny the appellant the benefit of adjusting the excess payment of service tax made during 2009-2010. The Tribunal concluded that the appellant was entitled to the adjustment of the excess service tax paid by them, leading to the demand for service tax being set aside. Consequently, the appeal was allowed, and the appellant's position regarding both penalty imposition and adjustment of excess service tax was upheld.

In conclusion, the Tribunal's judgment favored the appellant on both issues, ruling against the imposition of a penalty for delayed payment of service tax and allowing the adjustment of excess service tax despite procedural lapses in filing returns.