Short tax paid can be adjusted with the excess tax paid in subsequent months/quarters

The CESTAT, Delhi in M/s. B.L. Kashyap & Sons Ltd. v. Commissioner of Service Tax [Service Tax Appeal No. 54315 of 2014 dated May 30, 2013], while quashing the impugned order, set aside the liability, and held that the appellant is eligible to adjust the short tax paid with the excess tax paid in subsequent month/quarter in line with the provisions of Rule 6 (4A) of the Service Tax Rules, 1994 ("the Service Tax Rules") as the appellant has made good the service tax short paid by them, along with interest.

Facts

M/s. B.L. Kashyap & Sons Ltd. ("the Appellant") has mistakenly paid short Service Tax in the initial months of April, August, and September and excess Service Tax in the months of May, June, and July due to the newly introduced Works Contract Services.
The Commissioner of Service Tax ("the Respondent") issued a Show Cause Notice dated April 24, 2009 ("the SCN") seeking recovery of the service tax of Rs. 1,58,52,669/- for wrongfully adjusting the Service Tax under Rule 6(3) of the Service Tax Rules along with the Penalty and the interest. The Adjudicating authority duly confirmed the order.

The Appellant contended that the present case is a result of incorrect filing of the entries in the ST-3 returns under Rule 6 (3) instead of Rule 6(4A) of the Service Tax Rules. They have made good the service tax short paid along with interest which cannot be demanded again simply because the same was mentioned in the wrong columns in the return.

The Appellant further contended that the SCN is merely based on the premise that the adjustments were in terms of Rule 6(3) of Rules and based on the facts that the appellant failed to produce evidence in consonance with the payment received for providing such services.

Aggrieved by the Adjudicating Authority's order ("the Impugned Order"), the Appellant filed the appeal before CESTAT, Delhi.

Issue

Whether the short tax paid in returns can be adjusted with the excess tax paid in subsequent months/quarters?

Held

The CESTAT, Delhi in Service Tax Appeal No. 54315 of 2014 held as under:

• Observed that, the Adjudicating authority failed to discuss the submissions made by the Appellant and the Chartered Accountant's certificate and also did not counter or negate the claims and submissions made by the Appellant.
• Relied upon the judgement of Schwing Stetter (India) Pvt. Ltd. v. Commissioner of Central Excise, LTU [2016 (45) S.T.R. 101(Tri. – Chennai)], wherein the Tribunal held even though the appellants have not specifically intimated the department in this regard, but the adjustment was declared in their ST-3 returns. Accordingly, intimation of such adjustment stands made to the department. At most, it is a procedural lapse and merely for this, the excess amount paid cannot be permitted to be retained by the Government.
• Further relied upon the judgement ofDell India Pvt. Ltd. v. Commissioner of Service Tax [2016 (42) S.T.R. 273(Tri. – Bang.)], wherein the Tribunal held that if excess payment of tax in a month is not on account of reasons involving interpretation of law, taxability, classification, valuation or applicability of exemption notification and is purely on account of the inability of the assessee to exactly determine the total amount collected during the month against the bills raised as a result of which he had determined his tax liability on estimation basis, then the excess amount of tax paid during the month can be adjusted against his tax liability during other months. In this regard, there cannot be any monetary limit.
• Held that, the appellant can adjust the Service Tax excess paid against his service tax liability for the succeeding month or quarter as sub-rule 4A of Rule 6 of the Service Tax Rules 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 the Service Tax Rules as 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.
• Set aside the Impugned Order.

Relevant Provision

Rule 6 of the Service Tax Rules:

"Payment of Service Tax
(1) …….
(2) …….
(3)......
(4)…….
(4A) Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.
(4B) The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation, or applicability of any exemption notification.
(4C) ………."