Tour operator allowed to adjust service tax deposits under Service Tax Rules, 1994. No dispute on taxability.

The Tribunal allowed the appellant, a tour operator, to adjust excess service tax deposits under Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994. The appellant initially paid tax under 'Business Auxiliary Service' but later adjusted it under 'Tour Operator Service' upon realizing the correct classification. As there was no dispute on taxability or legal interpretation, the Tribunal deemed the adjustment permissible. Consequently, the demand, interest, and penalty under Section 78 were set aside, and the appeal was allowed, with the decision pronounced in open court.

---

---

Issues:
1. Whether the appellant is allowed to adjust the service tax under the provisions of Rule 6(4A) read with Rule 6(4B) of Service Tax Rules, 1994.

Analysis:
The appellant, a tour operator, initially treated the discount received from an air travel agent as 'Business Auxiliary Service' commission and paid service tax accordingly. Subsequently, realizing that the receipt should be part of their turnover under 'Tour Operator Service', they adjusted the tax already paid. The main issue revolved around whether such adjustment was permissible under Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994.

The facts revealed that the appellant, during the period from March 2005 to March 2008, paid service tax on the gross amount received from tourists for organizing tours, minus the cost of air travel tickets. An audit highlighted that the appellant received a discount from the air travel agent, leading to a suggestion of tax liability under 'Business Auxiliary Service'. The appellant then promptly paid the service tax as advised. Subsequently, the department directed the appellant to pay service tax under the 'Tour Operator Service' head on the full ticket price, which the appellant did by adjusting the tax previously deposited under 'Business Auxiliary Service'. A show cause notice was issued objecting to this adjustment, leading to further proceedings.

Upon considering Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994, the Tribunal found that the adjustment of excess service tax deposit is permissible in the succeeding month or quarter, provided the excess amount is not due to reasons involving interpretation of law, taxability, valuation, or exemption notifications. In this case, as there was no dispute regarding taxability or interpretation of law, since the appellant had initially paid tax under 'Business Auxiliary Service' and later under 'Tour Operator Service', the Tribunal held that the restriction under Rule 6(4B) did not apply. Consequently, the adjustment made by the appellant was deemed allowable, leading to the setting aside of the demand along with interest and penalty under Section 78. The appeal was allowed, and the decision was pronounced in open court.

---