2024 (1) TMI 1159 - AT - Service Tax

Recovery of short payment of Service Tax - stand of the Appellant is that Service Tax in advance was paid but had not been shown in the ST-3 Return as advances and not been adjusted subsequently in the returns filed for subsequent period - HELD THAT - Section 68 commands for payment of Service Tax by the person providing taxable service and Rule 6 provides the manner in which payment of Service Tax can be effected. Rule 6 Sub Rule 1A, Sub Rule 4A and Sub Rule 4B deal with payment of Service Tax made in advance that can be adjusted against subsequent Service Tax dues for the succeeding fact that quarter or subsequent period and while Sub Rule A is conditional to the intimation of advance tax paid is to be given within 15 days to the Jurisdictional Superintendent of Central Excise, Sub Rule 4A has not stipulated any such condition and, therefore, such excess amount paid by the Appellant against his Service Tax liability could have been adjusted for the subsequent period, which Appellant failed to do may be due to inadequate knowledge/understanding of law till it was put to notice for recovery but that cannot be the sole ground to conform the demand when duty liability for the consideration amount received in advance was discharged, though without a proper intimation. This being the fact on record and having regard to the rules that enable adjustment of advance payment of tax against subsequent dues, there are no hesitation to hold that Appellant had discharged the duty liability but only failed to record the same in the ST-3 Returns, apparently for the reason that it had filled the returns subsequently upon payment of late fee of Rs.20,000/-, which was also confirmed by the Commissioner and that remained unchallenged in this appeal. The appeal is allowed in part.

Summary

Issues:
- Conformation of demand of Service Tax on taxable value
- Accounting error in payment of Service Tax

Conformation of demand of Service Tax on taxable value:
The appeal challenged the demand of Service Tax of Rs.3,66,357/- on the taxable value of service @ Rs.25,26,600/- for the period between April 2015 to March 2016 under Section 73(1) and (2) of the Finance Act, 1944, along with interest and equal penalty by the Commissioner of CGST. The Appellant was engaged in various activities like film production, trading copyrights, and post-production services, registered under multiple taxable services. The investigation revealed a short payment of Service Tax, leading to demand-cum-show-cause notices. The Appellant settled one notice under the Sabka Vishwas Scheme but disputed the remaining demand. The Appellant argued that the Service Tax demand was made due to an accounting error in showing advances received as taxable income in the wrong financial year. The Chartered Accountant's certificate supported the claim that the Service Tax was paid in advance but not adjusted in subsequent returns, leading to the demand being contested.

Accounting error in payment of Service Tax:
The Appellant contended that the Service Tax demand arose from mistakenly paying tax on advances received in the wrong financial year, leading to an accounting discrepancy. The Respondent-Department, however, supported the Commissioner's order, stating that the balance sheet and returns did not explicitly mention the advance tax payment. The Chartered Accountant's certificate highlighted the difference in advances received between financial years and the non-reporting of credit notes, attributing the discrepancy to accounting irregularities. The Tribunal analyzed the expert opinion of the Chartered Accountant, accepting the accounting error as a valid reason for the discrepancy. The Tribunal examined the permissibility of adjusting advance tax payments in subsequent periods as per the Finance Act and Service Tax rules. It was found that the Appellant had paid the duty liability in advance but failed to record it in the ST-3 Returns, leading to the demand being contested. The Tribunal allowed the appeal in part, setting aside the demand for Service Tax while confirming the late filing penalty for the relevant period.