2023 (5) TMI 1195 - AT - Service Tax

Short payment of service tax - subsequent adjustment with excess tax paid - appellant submits that the mistake of short or excess payment has occurred due to the newly introduced Works Contract Service - Rule 6 (4A) of STR, 2004 - HELD THAT - On going through the records of the case and the reconciliation statements submitted by the appellant, it is clear that the appellant has certainly short paid service tax in initial months of April, August and September and excess paid in the months of May, June and July. On reconciliation they have paid the service tax liability along with interest and reflected the same in the returns for the period October 2007 to March 2008. We find that the adjudicating authority simply goes by the show cause notice and bases his confirmation of service Tax on the appellants on the entries made in the ST-3 returns, referring to Rule 6(3) of STR. The Adjudicating authority has not considered the submissions of the appellant and the reconciliation statements submitted thereof; the Adjudicating authority did not discuss the submissions made by the appellants and the Chartered Accountants Certificate. He proceeds only on the premise that the appellant has violated the provision of Rule 6 (3) of STR, 1994 - it is found that the adjudicating authority did not counter or negate the claims and submissions of the appellants. Not even a single piece of evidence has been adduced to show that the appellants have in fact violated the provisions of Rule 6 (3) of STR, 1994. Except for making a bald averment that the appellants have violated the provisions of Rule 6 (3) of STR, 1994, no other discussion is made to show as to how the conclusions were drawn. The appellant can adjust the service tax excess paid against his service tax liability for the succeeding month or quarter; sub-Rule 4A of Rule 6 of STR starts with a non-obstante clause and, therefore, the procedure prescribed for the earlier rules, if any, are not applicable in the instant case; the appellant is eligible to avail the provisions of Rule 6 (4A) of STR, 1994. The fact that the appellant has made good the service tax short paid by them, along with interest, is not refuted either in the SCN or the impugned order. Therefore, there is considerable force in the submissions of the appellant. The Tribunal in the case of M/S. SCHWING STETTER (INDIA) PVT. LTD. VERSUS CCE, LTU, CHENNAI 2016 (6) TMI 239 - CESTAT CHENNAI has observed that the excess amount paid in the month of May, 2011 adjusted by the appellants in the subsequent months tax liability is absolutely in order. Therefore, invoking Section 73(1) for a non-existing 'short-payment' is not sustainable. Accordingly, the impugned order is set aside. Tribunal in the case of DELL INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE 2015 (12) TMI 1555 - CESTAT BANGALORE has observed that when the assessee paid excess amount of tax to the exchequer, law of the land is very clear under Article 265 of the Constitution of India, which says that No tax shall be levied or collected except by authority of law. If Revenue becomes very rigid on strict compliance of the procedure every time and all the time, there could be situations where such rigidness and strictness on the part of the Revenue could become contrary to the provisions of the Article 265 of the Constitution of India. The impugned order cannot be sustained and is liable to be set aside - Appeal allowed.

Issues Involved:

1. Incorrect filing of service tax returns.
2. Adjustment of service tax under Rule 6(3) and Rule 6(4A) of Service Tax Rules (STR).
3. Demand for repayment of service tax and imposition of penalties.
4. Time-barred nature of the demand.

Summary:

1. Incorrect Filing of Service Tax Returns:

The appellant, M/s B.L. Kashyap & Sons Ltd., acknowledged that they incorrectly filed entries in the ST-3 returns. They mistakenly reported adjustments under Rule 6(3) instead of Rule 6(4A) of the Service Tax Rules (STR). Despite this error, they argued that they had fully paid the service tax due along with interest and that this should not result in a demand for repayment.

2. Adjustment of Service Tax Under Rule 6(3) and Rule 6(4A):

The appellant contended that the adjustments made were due to short payments in some months and excess payments in others. They claimed the right to adjust these under Rule 6(4A) of STR, which allows for such adjustments. The adjudicating authority, however, based its decision on Rule 6(3), which requires the refund of consideration to customers before making adjustments. The authority did not verify the appellant's claims or the reconciliation statements provided.

3. Demand for Repayment of Service Tax and Imposition of Penalties:

The adjudicating authority confirmed the demand for Rs. 1,58,52,669/- and imposed a penalty of Rs. 1,60,00,000/-. The appellant argued that the demand was unjust as they had already paid the service tax along with interest. They cited previous case law to support their position that adjustments should be allowed even if there was an error in filing.

4. Time-Barred Nature of the Demand:

The appellant argued that the demand was time-barred since the ST-3 returns for the period in question were filed on 25.10.2007, and the show cause notice was issued on 24.04.2009. The tribunal did not address this issue as it decided the case on merits.

Tribunal's Findings:

The tribunal found that the adjudicating authority did not consider the appellant's submissions or the reconciliation statements. It noted that Rule 6(4A) allows for the adjustment of excess service tax paid, and this rule supersedes other procedures. The tribunal cited previous decisions supporting the appellant's right to adjust excess payments and ruled that the demand and penalties were not justified.

Conclusion:

The tribunal set aside the impugned order, ruling in favor of the appellant on merits and allowing the appeal. The issue of limitation was not addressed due to the decision on merits. The appeal was allowed, and the order was pronounced in open court on 30/05/2023.

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