2012 (6) TMI 299 - AT - Service Tax

Tribunal cautions strict adherence to legal provisions in service tax demand case

BSNL Versus Commissioner of Central Excise, Chandigarh

The tribunal upheld the Commissioner's decision to reject the adjustment plea and confirm the service tax demand due to the appellant's failure to explain ... Adjustment of excess payment made for one period in respect of tax liability for future period – Held that:- Sub-rule (3) of Rule 6 of the Service Tax Rules, 1994 have been amended providing for adjustment of excess payment against future tax liability under rule 6(4A) and 6(4B) of the Service Tax Rules, 1994. Even though these rules were not in force at the material time and therefore are not applicable to the case at hence, considering the spirit of the amended rules and the fact that the appellant is a public sector unit and the entire amount of tax has been paid by adjustment. However, appellant public sector unit is cautioned that they should follow the legal provisions strictly in future and any contravention will be seriously viewed. Appeal is allowed Issues: Adjustment of excess payment under Rule 6(3) of Service Tax Rules, 1994; Applicability of amended rules 6(4A) and 6(4B) of the Service Tax Rules, 1994.In this case, the appellant, a public sector unit, adjusted excess payment made for one period against tax liability for a future period, resulting in demand confirmation and penalty imposition. The appellant argued that such adjustment is permissible under Rule 6(3) of the Service Tax Rules, 1994. The Departmental Representative (DR) opposed this, citing a previous decision where the conditions for applying Rule 6(3) were outlined. The said rule allows adjustment of excess service tax paid on a pro rata basis against future tax liability if the service provider has refunded the value of the taxable service and the service tax to the recipient. The tribunal noted that the appellant failed to explain how the excess payment occurred and whether the refunded amount included the service tax. Consequently, the Commissioner's decision to reject the adjustment plea and confirm the service tax demand was upheld.Subsequently, the Service Tax Rules, 1994 were amended to include rules 6(4A) and 6(4B) allowing adjustment of excess payment against future tax liability. Although these rules were not in force during the relevant period, the tribunal considered the spirit of the amended rules and the appellant's status as a public sector unit. Taking a lenient view, the tribunal set aside the impugned order but cautioned the appellant to adhere strictly to legal provisions in the future, emphasizing that any violations would be seriously dealt with. Ultimately, the appeal was allowed in favor of the appellant public sector unit.