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TMI Blog2024 (4) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, raised doubt regarding the genuineness of the credit note, the doubt in the mind of Commissioner (Appeals) is specified by any evidence which has been part of record. On the contrary, it is submission of the appellant that the figures stated in the balance sheet for the year 2009-10 wherein the total value of services provided is shown as Rs.24,55,90,004/- instead of Rs.27,63,86,166/- as claimed in the ST-3 returns. After this difference in the true values is on account of the amount refunded by way of issuance of credit note as this amount of Rs.3,24,07,774/- inclusive of service tax of Rs.10,65,330/- was refunded back to their service recipients, the same was excess payment and could have been adjusted as per Rule 6(3) in subsequent returns. On going through sub-rule 3, it is found that the excess amount of service tax paid by the assessee can be adjusted against his service tax liability for the subsequent period. Only condition for eligibility of this sub-rule is that if assessee has refunded the value of taxable service and service tax thereon to the person from whom it was received. Appellant claims that appellant has refunded the excess S-T to its customers - the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty Service. 2.2 During the course of audit, it was observed that appellant have wrongly adjusted service tax payment to the tune of Rs.10,65,330/- under Rule 6 (3) of Service Tax Rules, 1994 in the month of October, 2010 and November, 2010 as reflected in ST-3 returns for the period October, 2010 to March, 2011. 2.3 Appellant was asked to deposit this wrongly adjusted service tax vide letter dated 23.09.2013 which was replied by the party stating that they had issued credit note dated 31.03.2010 amounting to Rs.3,24,07,774/- including service tax of Rs.10,65,330/- which was got missed while calculating the service tax payable. Since they had paid excess service tax, therefore, they made adjustment of the service tax in subsequent ST-3 returns. 2.4 The submissions made by the appellant was not accepted by the revenue authorities, who were of the view that Rule 6 (3) of Service Tax Rules, 1994 do not provide for such adjustments. 2.5 Show cause notice dated 06.08.2015 was issued to the appellant asking them to show cause as to why- a) Service tax amounting to Rs.10,65,330/- (Rupees Ten Lacs Sixty five thousand three hundred and thirty only) short paid/ wrongly adjusted during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty under this clause shall not exceed the amount of Service tax that he failed to pay. Section 77. Penalty for failure to furnish prescribed return. - If a person fails to furnish in due time the return which he is required to furnish under Section 70 or the rules made thereunder, he shall be liable to a penalty which may extend to an amount not exceeding one thousand rupees. Section 78. Penalty for suppressing value of taxable service. - If the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise in the course of any proceeding under this Chapter is satisfied that any person has, with intent to evade payment of Service tax, suppressed or concealed the value of taxable service or has furnished inaccurate value of such taxable service, he may direct that such person shall pay by way of penalty, in addition to Service tax and interest, if any, payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of income tax sought to be evaded by reason of suppression or concealment of the value of taxable service or the furnishing of inaccurate value of such taxable service. Section 80. Penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those definitions and is liable to Service tax. It is after a period of time that disputes arose, matters reached judicial forums, doubts cleared and law laid down. It cannot therefore be said that there is any intention to avoid payment of tax by such taxpayers who bona fide believe that their activity is not liable to Service tax. Probably keeping this in mind, the legislature has not only provided for imposing penalty, but also conferred a power coupled with discretion on the authority not to impose penalty, if there was a reasonable cause for the assessee not to pay tax. As the wordings of Sections 76 and 78 stand, unless, the ingredients mentioned in both the sections exist, those sections are not attracted. After those ingredients are held to be in existence and the sections are attracted, even then the imposition of penalty is not automatic. 11. Section 80 is emphatic in terms of text that no penalty shall be imposable on the assessee for any failure referred to in Sections 76, 77, 78 and 79, if the assessee proves that there was a reasonable cause for the said failure. Therefore, mere failure to comply with the requirements of the Section, does not vest any power in the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment (see Smt. Parayankandiyal Eravath Kanapravan Kalliani Amma v. K. Devi AIR 1996 SC 1963). Therefore in order to bring in application of Section 271C in the backdrop of Section 273B. absence of reasonable cause, existence of which has to be established by the assessee, is the sine qua non. Levy of Penalty under Section 271C is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure was on account of reasonable cause. Reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described a probable cause. It means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument. 4.2 In the impugned order following has been observed for upholding the Order-in-Original:- 6. I have carefully gone through the grounds of appeal, finding in the impugned Order in Original, record of personal hearing and all other materials available on record. The issue involved in the present case is whether the appellant is entitled to claim adjustment of service tax Rs. 10,65,330/- under Rule 6(3) of Service Tax Rules' 1994, which they claim to be on account of poor services rendered by them to their client. In support of their claim the appellant has produced a credit note issued by them in favour of their client, the amount of which is adjusted against the running bills issued by them for services rendered. 7. I find that Rule 6(3) of Service Tax Rules' 1994, at the relevant time allowed adjustment of excess service tax paid by a service provider in respect of a taxable service which was not so provided by him, either wholly or partially for any reason. This rule did not allow adjustment of service tax already paid for any other reason such as poor/deficient service as being claimed by the appellant in the instant case. 8. As regards the credit note submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Rule 6(3) is reproduced bellow:- Where an assessee has paid to the credit of Central 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 Prorata basis) against the service tax liability for the subsequent period, if the assessee has refunded the value of taxable services and service tax thereon to the person from whom it was received. 4.4 From perusal of the above Rule, it is evident that such adjustment is provided in respect of services which were either not provided or partially provided for any reason. The phrase partially provided for any reason would include the short payments made by the recipient or adjustments made by the recipients while making payments to the service provider against any deficiency in the services provided. Appellant has while replying to the audit objection in his letter dated 10.05.2013 (received by Office Supdt on 13.05.2013) stating as follows:- In the instant case, an amount of Rs.27,63,86,166/- which includes Rs.23,96,96,329/- as the taxable service portion and Rs.3,66,89,837/- towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case is covered under Rule 6(3) of the Service Tax Rules whereas Revenue s contention is that Rule 6(3) is not applicable. Rule 6(3) as it existed at the relevant time reads as under : 6(3)...... On going through this sub-rule, we find the excess amount of service tax paid by the assessee can be adjusted against his service tax liability for the subsequent period. Only condition for eligibility of this sub-rule is that if assessee has refunded the value of taxable service and service tax thereon to the person from whom it was received. Appellant claims that appellant has refunded the excess S-T to its customers. We do not agree with the finding of the Commissioner (Appeal) that this sub-rule is applicable only to the case of excess payment of service tax which can be made good in subsequent period and not to the case where taxable values are not ascertainable for longer period as sub-rule 6(3) does not say so. We also agree with appellant s contention that sub-rule 6(3) is not dependent on provision of sub-rule 6(4). Moreover there is no time limit prescribed under sub-rule 6(3) for making adjustment. B. In case of B4U Television Network (I) P. Ltd [2014 (35) S.T.R. 88 (Tri. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in case of Mumbai International Airport Pvt. Ltd [2014 (33) S.T.R. 308 (Tri. - Mumbai)] held as follows: 5.1 The short issue involved herein is whether the appellant could have adjusted the excess Service Tax demand of Rs. 4,17,73,025/- which has been paid under protest. As per Rule 6(3) of Service Tax Rules, 1994, there was a provision of adjustment of excess Service Tax paid towards the tax liability for the subsequent period. In the present case, the appellant sought clarification from the department and they were advised by the department that they are not liable to pay Service Tax on renting/leasing the premises in the Airport. The appellant adjusted the excess Service Tax paid by them against the tax liability during January - March, 2007. The action taken by them was strictly in accordance with the provisions of said Rule and, therefore, we find that the demand towards such adjustment of credit in the impugned order is not sustainable in law. The only fact that needs to be verified is whether the amount adjusted is the amount of excess tax paid or not. This needs to be verified by the department from the records and the evidence adduced by the appellant in this regard. If, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elled or modified tickets are provided by a travel agent in the fortnightly returns filed and adjustment of the commission is made subject to final approval of the airlines. The commission is ultimately paid by the airlines on the net commission received by a travel agent. Accordingly, no question arises for separate claim of refund of service tax. E. In the case of British Airways [2013 (29) S.T.R. 177 (Tri. - Del.)] Delhi bench held as follows: 18. The third dispute is with respect to denial of self-adjustment of excess service tax paid by the appellant on account of cancellation of tickets. The appellant claimed that it had refunded the service tax amounting to Rs. 14,48,81,180/- to the passengers on account of the cancellation of tickets but demand on this account is also confirmed against them by the Commissioner. Appellant contended that under Rule 6(3) of the Service Tax Rules appellant is entitled for self-adjustment of excess service tax paid against the service tax liability for the subsequent period. For the sake of brevity the Rule 6(3) of the Rules is reproduced below :- 6. Payment of service tax (3) ....... . We find that on going through the Rule 6(3) assessee is eli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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