2014 (12) TMI 784 - AT - Service Tax

Service tax refund denied for cash payment error; correction allowed in CENVAT credit account.

The Tribunal denied the refund of service tax paid in cash due to a mistake in the CENVAT credit account. The original cash payment was considered correct ... Refund of service tax paid in cash - CENVAT credit - Correction of CENVAT account entries - Revision to correct mistake or omission under Rule 7B of the Service Tax Rules, 1994Refund of service tax paid in cash - CENVAT credit - Revision to correct mistake or omission under Rule 7B of the Service Tax Rules, 1994 - Whether refund of service tax paid in cash for the period October, 2008 to March, 2009 is admissible after subsequent correction of CENVAT account showing availability of credit - HELD THAT: - The appellants discharged their service tax liability in cash and filed S.T.-3 return (filed 24-4-2009) showing nil opening CENVAT balance; returns were finalised by the Department. Subsequently the appellants discovered mistakes in maintenance of the CENVAT account and, after making entries showing available credit, debited their CENVAT account and claimed refund of the cash payment. The Tribunal notes that the cash payment recorded in the return at the relevant time was the correct payment of duty. The attempted revision in the CENVAT account was made after a lapse of 2 years and 8 months, whereas Rule 7B permits revision to correct mistake or omission only within a limited period (90 days) of filing the return; although the correctness of the CENVAT corrections is not finally accepted by Revenue, that subsequent correction cannot be used as a ground to disturb the earlier lawful cash payment and to claim refund. The Tribunal therefore refused to allow refund of the cash deposit as the payment, when made and reflected in the return, was proper. [Paras 3, 4]Refund of service tax paid in cash for October, 2008 to March, 2009 is not admissible on the basis of subsequent correction to the CENVAT account.Correction of CENVAT account entries - CENVAT credit - Whether the appellants are entitled to have the second-time reversal corrected in their CENVAT account - HELD THAT: - While rejecting the refund claim, the Tribunal recognised that the appellants had subsequently debited service tax through their CENVAT account. The Tribunal held that, notwithstanding the refusal of refund, the appellants are entitled to have the entries in the CENVAT account corrected so as to regularise the second-time reversal and reflect the correct position of CENVAT credit, permitting correction of those accounting entries. [Paras 5]The appellants are entitled to correction of the entries in their CENVAT account to rectify the second-time reversal.Final Conclusion: Appeal dismissed insofar as refund of cash-paid service tax for October, 2008 to March, 2009 is sought; appeal allowed to the limited extent of directing correction of the appellants' CENVAT account entries to regularise the second-time reversal. Issues:Refund of service tax paid in cash due to mistake in CENVAT credit account.Analysis:The appellants were engaged in providing taxable services and were registered with the Revenue. They availed CENVAT credit for service tax paid on input services. However, an error in maintaining the CENVAT credit account led to the appellants mistakenly paying service tax in cash for a period. Subsequently, they corrected the mistake in the CENVAT account and claimed a refund of the amount paid in cash. The authorities rejected the refund claim, leading to the present appeal.The appellants initially discharged their service tax liability through cash as their CENVAT account showed a nil balance. Upon discovering the mistake in the CENVAT account, they rectified it by debiting the service tax again through the CENVAT account and applied for a refund of the amount paid in cash. The authorities rejected the refund claim, citing a delay in seeking revision beyond the permissible period under Rule 7B of the Service Tax Rules, 1994, which allows revisions within 90 days of filing the return. The correction of entries in the CENVAT account, although not directly part of the appeal, was deemed relevant to the refund issue.The Tribunal noted that the original payment of service tax through cash, duly reflected in the returns, was considered correct at the time of payment. The subsequent correction in the CENVAT account, leading to the availability of CENVAT credit, was not deemed a valid ground for refunding the cash deposit. The Revenue did not accept the correction of entries in the CENVAT account. Consequently, the Tribunal found no justification for refunding the cash deposit, as the original payment was considered correct when made.While denying the refund of service tax paid in cash, the Tribunal acknowledged that the appellants had also paid the service tax through CENVAT credit. Therefore, the Tribunal allowed the correction of entries to reflect the second payment through CENVAT credit in the CENVAT account. The appeal was disposed of accordingly, with the decision pronounced on 31-1-2014.