Suo motu adjustment of exempt-period service tax not permitted; refund is the proper route for excess payment.

Service tax paid for a period covered by exemption could not be unilaterally adjusted against a later tax liability under the service tax scheme. The excess amount paid for the exempt period had to be recovered through a refund claim, not by suo motu set-off. Any contention that the amount could be treated as available credit to the recipient was a separate issue to be examined, if permissible, under the Cenvat Credit Rules after payment of tax with interest. Suo motu adjustment was therefore not permissible.

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Issues: Whether service tax paid for a period when it stood exempt could be adjusted suo motu against service tax liability for a later period, and whether such excess payment ought instead to be claimed by way of refund.

Analysis: The exemption order covered the earlier period, but the amount paid for that exempt period was not available for unilateral adjustment against subsequent liability under the service tax scheme. The proper course was to seek refund of the excess amount paid for the exempt period. The plea that the amount could be treated as available credit to the recipient was held to be a separate matter to be pursued, if permissible, under the Cenvat Credit rules after payment of tax with interest.

Conclusion: Suo motu adjustment was not permissible, and the assessee was required to seek refund for the excess tax paid for the exempt period.

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