2010 (3) TMI 357 - AT - Service Tax

Short payment of service tax- adjustment- in this case the appellant make the excess payment of tax and the department reject the adjustment of this excess amount on the ground that the adjustment were not available earlier to 01.03.2007 and that appellant being service receiver cannot avail such adjustment. Commissioner (Appeals) allowed the appeal and set aside the order-in-original relying upon various decisions. Held that- Where an assessee has paid to the credit of Central (3) Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received thus, Commissioner (Appeals) order is proper and correct and does not suffer from any infirmity. Appeal filed by the revenue is rejected.

Issues:
1. Adjustment of excess service tax paid by the appellant under Rule 6(3) of Service Tax Rules, 1994.
2. Applicability of adjustment provisions retrospectively.
3. Compliance with Rule 4(b) of Service Tax Rules, 1994 for adjustment.
4. Interpretation of Rule 6(3) regarding refund of service tax for adjustment.
5. Appeal against the order of the Assistant Commissioner.

Analysis:

1. Adjustment of Excess Service Tax Paid:
The appellant, a service tax payer on 'GTA' services, claimed adjustment of excess service tax paid under Rule 6(3) of Service Tax Rules, 1994. The department disputed this adjustment, arguing that the appellant, as a service receiver, could not avail such adjustment. The Commissioner (Appeals) allowed the appeal, relying on Tribunal decisions, stating that adjustment provisions must be applied in their entirety. The learned JCDR reiterated that the adjustment should follow Rule 6(3) and not Rule 6(4A), introduced later. The Tribunal upheld the Commissioner's decision, emphasizing that the appellant had paid excess service tax and was entitled to adjust it against subsequent liabilities.

2. Applicability of Adjustment Provisions Retrospectively:
The department contended that adjustment provisions could not be applied retrospectively. However, the Tribunal found that the adjustment made by the appellant on excess payments under Rule 6 of the Service Tax Rules for subsequent liabilities was permissible. The Tribunal emphasized that the rule allowed adjustment of excess service tax paid against liabilities for the subsequent period, supporting the Commissioner's decision.

3. Compliance with Rule 4(b) for Adjustment:
The department argued that the appellant did not satisfy the conditions of Rule 4(b) of Service Tax Rules, 1994, as they failed to intimate details and reasons for adjustment within the specified period. However, the Tribunal did not find this argument compelling and upheld the Commissioner's decision, allowing the adjustment based on Rule 6(3) provisions.

4. Interpretation of Rule 6(3) Regarding Refund of Service Tax for Adjustment:
The Tribunal interpreted Rule 6(3) which allows adjustment of excess service tax paid against subsequent liabilities if the value of taxable service and service tax thereon is refunded to the person from whom it was received. The Tribunal found that the appellant had paid excess service tax during the period and sought to adjust it subsequently, meeting the conditions of the rule.

5. Appeal Against the Order of the Assistant Commissioner:
The revenue challenged the findings of the Assistant Commissioner before the Tribunal. However, the Tribunal rejected the appeal, affirming the Commissioner (Appeals) decision that the adjustment made by the appellant on excess payments under Rule 6(3) was valid and in accordance with the law.

In conclusion, the Tribunal upheld the appellant's right to adjust excess service tax paid under Rule 6(3) against subsequent liabilities, rejecting the revenue's contention that such adjustment provisions could not be applied retrospectively. The Tribunal found the Commissioner (Appeals) decision proper and correct, emphasizing the appellant's compliance with the provisions of the Service Tax Rules.

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